Bloomberg, Kumar and Development

Interesting article by Mallaby;

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.

Related;
Starting a Career in International Development