5 cities for development organizations to consider when expanding

As major donors institute localization requirements in their aid programs, global development organizations are strategically expanding their presence and getting closer to projects in the field by shifting their center of gravity away from capital cities in the developed world to viable business centers in the developing world.

Indeed, over the course of the past few years, Devex has observed the world’s most prominent development organizations establishing regional and satellite offices in hubs across Asia, Africa, the Middle East and Latin America.

Development leaders tell us that establishing offices in the developing world is critical to growth and efficiency as it helps tap more localized funding streams and talent, improve project delivery, and build key relationships.

At the same time, strategic expansion into developing markets presents a series of new business vulnerabilities that must be carefully assessed and managed. Many of these emerging regions experience security threats, political volatility, economic instability and other operational risks that can affect development organizations.

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Ease of doing business, human resources, adequate financial and IT infrastructure, security, access to communications and transport services, and proximity to clients and partners are just a few of the issues that development organizations take into account when evaluating new office locations.

As development organizations continue to vet various global cities for office expansion, Devex members helped us determine five developing world cities where organizations have experienced success and explain why they are emerging as regional, if not global, development centers.

Here are the results:

Bangkok, Thailand

Located in the heart of Southeast Asia and the Greater Mekong Subregion, Bangkok is widely regarded as a viable communications and logistics hub to support business operations across the Southeast Asian region.

The capital of tourist hot spot Thailand, Bangkok provides direct flights to Myanmar — a country at the top of the global development agenda. It also offers relatively easy access, via flights and bus services, to Laos and Cambodia. Even Dhaka, Bangladesh — another aid donor priority — is just a two or three-hour plane ride away.

One major area of focus for donors are the ethnic minorities from Myanmar, Laos, China and Cambodia, who are among the 3.5 million illegal migrants, displaced persons and residents without full citizenship in Thailand.

Bangkok is home to many of the United Nations’ regional organizations, including the U.N. Economic and Social Commission for Asia and the Pacific and the Asia Pacific regional center of the U.N. Development Program. The Office of U.S. Foreign Disaster Assistance Asia-Pacific Regional Office for East Asia and Pacific Region is also in Bangkok. OFDA is responsible for leading and coordinating the American response to disasters overseas.

While Thailand shares many of the same development and governance challenges as other Southeast Asian countries and is vulnerable to natural disasters and political unrest, development organizations generally applaud the Royal Thai Government for supporting their presence and activities.

For Pawana Wienrawee, PATH’s country team leader in Thailand, “existing regional development networks” made it easier for the organization to build partnerships in Bangkok. Wienrawee also believes the projected economic success of the Southeast Asian region promises the city “will be even more of a regional hub” in the future.

The international nongovernmental organization has managed several major regional projects from its country office in Thailand.

Thailand has already joined Singapore, Malaysia, Taiwan and Hong Kong in the World Bank’s list of easiest countries and territories to do business in for East Asia and the Pacific, but claims a lower cost of living compared with these neighbors.

Bogota, Colombia

Despite persisting social inequalities and lingering security concerns, Bogota is steadily transforming itself into a place where both private sector companies and development organizations want to do business.

A recipient of $1 billion in development assistance in 2011, Colombia is home to a wide range of international organizations, private development agencies and consulting firms, and civil society groups.

Among the prominent development organizations with offices in Bogota are the U.N. High Commissioner for Refugees and U.N. High Commissioner for Human Rights, the International Finance Corporation — whose Bogota office also oversees its operations in Bolivia, Ecuador, Peru and Venezuela — and the Center for Latin American Strategic Studies, an independent nonprofit, nonpartisan think tank with programs on energy cooperation, foreign policy, diplomacy and corporate social responsibility.

Colombia is also rated highly by the World Bank in terms of ease of doing business, coming third in Latin America and the Caribbean.

Regularly referred to as the “Athens of South America,” Bogota is also known for its large number of universities and libraries, contributing to a young and skilled labor force.

Bogota is also cited for its lower cost of living relative to neighbors such as Sao Paulo, Brazil. Roughly $2,500 ensures the same living standards as $3,300 does in Sao Paulo.

At the same time, donor countries are actively engaged in helping Colombia finalize a peace agreement to end the country’s 50-year internal armed conflict. The U.S. Agency for International Development has established a large mission in Colombia’s capital to support the peace process and reconciliation programs across the country.

“Bogota allows USAID to build the partnerships we need to achieve greater impact, including with the private sector, NGOs, government institutions, and academia,” USAID Mission Director for Colombia Peter Natiello told Devex.

Colombia’s participation in the recently launched Pacific Alliance, a Latin American trade bloc that also includes Chile, Costa Rica, Peru and Mexico, offers even more potential for collaboration. Further, Colombia’s status as a middle-income country and experience in addressing security, inequality, conflict and rural development challenges have turned it into a focal country for South-South and triangular development cooperation.

“Countries in South and Central America can learn a lot from Colombia,” Natiello added.

Nairobi, Kenya

One of Africa’s political and financial centers, Nairobi houses more than 100 major international companies and organizations, including the United Nations and the U.N. Environment Program. The United Nations’ office in Nairobi is the main coordinating headquarters for the global body in Africa and the Middle East, and employs roughly 3,000 international staff and a large number of local staff.

The largest African missions of USAID and the U.K. Department for International Development are also in Nairobi, as well as the largest embassies for most countries.

Devex recently hosted an international development career fair and partnerships forum in Nairobi, a nod to the city’s growing status as a regional hub and its pool of capable, experienced development professionals.

The U.S.-headquartered international development organization RTI International shared with Devex that when the firm decided to establish a regional office in Africa to support their sub-Saharan projects, the company deliberated on at least eight options, which included South Africa, Ghana, Egypt, Senegal and Morocco.

According to RTI Senior Director of International Offices John St. Clair, Nairobi emerged as the top choice primarily because of its IT and innovation environment, growing knowledge sector, and rich labor market. Since then, RTI has been successful staffing its Nairobi office almost exclusively with local staff.

Naomy Wanga, business analyst at Cardno Emerging Markets (East Africa), affirmed that “communications technology, business development services, and the availability of both expertise and business opportunities were major factors” in the company’s decision to open an office in Nairobi. At the same time, Wanga acknowledged some of Nairobi’s shortfalls, including a relatively high cost of living and traffic congestion.

While St. Clair is confident in his firm’s decision to pursue an office in Nairobi, he said Johannesburg is another viable option due to the city’s infrastructure, currency stability, ease of import and export, and work registration processes. South Africa, however, is becoming less of a focus for donors, which meant fewer market opportunities, while Nairobi is a hub for NGOs and RTI’s own donor clients.

While security is always a top priority for international firms operating out of Kenya, St. Clair noted that the recent attack on Westgate Mall has not caused RTI to question their decision to establish an office in Nairobi largely because they have anticipated security concerns and prepared for them.

Amman, Jordan

Despite the conflict and political instability that has rocked its neighboring countries, Jordan has remained peaceful and stable for nearly four decades. The World Bank ranks it as the least corrupt among the low and middle-income countries in the Middle East and North Africa.

Bordered by Iraq, Syria, the West Bank, Israel and Saudi Arabia, Jordan is inevitably affected by the instability in these areas. No country has taken in more refugees from the Syrian conflict than Jordan. The number of refugees has exceeded 500, 000, which is roughly 10 percent of Jordan’s own population. Despite these dynamics, Jordan continues to follow an open-border policy and grant refuge and public health and education services to refugees.

Donors have pledged assistance to offset Jordan’s spending on refugees, with the U.S. government committing $200 million in budget support in March 2013.

Amman’s relatively secure environment has made it a logistics hub for Syrian relief efforts as well as a base for the West Bank and Gaza programs of many donors, including Switzerland and Canada. It is an administrative hub for International Committee of the Red Cross operations in the Middle East, especially in Iraq, Lebanon, the Palestinian territory and Yemen, and the main training center for ICRC delegations in the Middle East, the Balkans and the Caucasus.

Jordan’s capital city features a young workforce and improving health and education indicators, but also grapples with water scarcity and a reliance on expensive and imported energy.

New Delhi, India

With South Asia falling behind in several Millennium Development Goals, donors have recognized the need to accelerate their efforts in the region. India is the world’s largest democracy and fourth-largest economy. More than half of its population, however, still lives on less than $2 a day.

India’s capital city, New Delhi, is home to a robust NGO community. It also hosts several U.N. regional offices, such as the UNDP, U.N. Office on Drugs and Crime, UNESCO and UNICEF, as well as 145 foreign embassies and high commissions, which focus on addressing development challenges within India and the broader South Asian region. Relative to its neighbors, New Delhi has a highly educated labor force with strong English-speaking skills.

“The proximity to policymaking bodies and easy connectivity to funders make New Delhi a natural location for major operations,” Hemanth Paul, country director of the American India Foundation, said.

India’s proximity to Afghanistan and increasing engagement with the fragile state is also an important consideration for donors. By plane, both Kathmandu and Kabul are only an hour and a half away from Delhi, while Colombo is a three and a half-hour flight, Dhaka two hours away, and Lahore a little more than an hour away. The New Delhi Railway station is the second-busiest in Asia, connecting Delhi to other locations in India and Lahore in Pakistan.

Development organizations working in Delhi cite some drawbacks to working there, including increasing costs and safety concerns for staff, as well as bureaucracy and red tape.

Other candidate cities that Devex members recommended were Manila, Philippines, which is home to the Asian Development Bank and many other NGOs and donors; Addis Ababa, Ethiopia, which hosts the African Union and U.N. Economic Commission for Africa; Dakar, Senegal, due to its strategic positioning in West Africa; Dhaka, Bangladesh, which has a vibrant NGO and microfinance sector; and Yangon, Myanmar, which is a new recipient of large amounts of development funding, resulting in a surge in aid programs and projects.

What global cities do you think international development organizations should consider when expanding?

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