Last month I met with ministers and local officials in Addis Ababa to explore areas where we, at the World Bank, can help build institutional capability in Ethiopia. The trip was an enriching experience, both personally and professionally. It was gratifying to see first-hand the good work and commitment to development exhibited by our staff in the country.
We have had a decade-long engagement with Ethiopia with a successful track-record. and the partnership is strong, with a robust future.
During my visit, I gave a lecture at Addis Ababa University on Public Investment Management before an audience of faculty, students, civil society organizations and donors. I shared with them how much public infrastructure investment has done for the country. and three times the average for Sub Saharan Africa.
This effort has contributed to growth that has averaged 10.9 percent since 2004—a figure higher than that of their neighbors or low-income countries on average. Infrastructure investment has also been helpful in expanding access to services and in gaining competitiveness, being a large landlocked country.
Sub-Saharan Arica has launched a new wave of “special economic zones” (SEZs), with more and more countries establishing or planning to establish SEZs or industrial parks. However, can Africa overcome the past stigma and make the zone programs truly successful?
This was one of the hot topics during the China-Africa “Investing in Africa Forum,” held in Addis Ababa, Ethiopia, from June 30 to July 1, organized by the World Bank Group with the government of Ethiopia, the government of China, the China Development Bank and UNIDO.
Why did the the African zones fail, in the past, to attract many investors? My answer was they were not truly “special” in terms of business environment and infrastructure provisions, and many constraints were not significantly improved inside the zones. This analysis was supported by another panelist, His Excellency Dr. Arkebe Oqubay, Senior Advisor to the Prime Minister of Ethiopia. According to Dr. Oqubay, past zones in Africa were “missing the ‘basics’ such as power, water and one-stop services, and were not aligned with national development strategy.”
That viewpoint was shared by almost all the other panelists, which included senior African and Chinese officials and international experts at the SEZ session, which was characterized with candid discussions and greatly benefited from the background paper prepared by Douglas Zeng of the World Bank Group’s Trade and Competitiveness Global Practice.
Women entrepreneurs in Ethiopia are disadvantaged from the start. They have less access to the finance, networks, and education which help their male counterparts advance. They face regular discrimination and harassment from society--sometimes even from their own families and communities. The challenges a woman entrepreneur in Ethiopia faces in growing her business are overwhelming.
Over the last 20 years, economic growth has helped to lift almost a billion people out of extreme poverty. But 1 billion people are still extremely poor. 1.1 billion live without electricity and 2.5 billion people without access to sanitation. For them, growth has not been inclusive enough.
In addition, growth has come at the expense of the environment. While environmental degradation affects everyone, the poor are more vulnerable to violent weather, floods, and a changing climate.
Development experts, policymakers, and institutions like the World Bank have learned a major lesson: If we want to succeed in ending poverty, growth needs to be inclusive and sustainable.
There is a growing consensus that a new approach is needed to meet the financial needs of developing countries to ensure sustainable, inclusive and resilient growth paths. We all know that Official Development Assistance (ODA) finance is limited and cannot address the massive investment needs of countries. In addition to increased domestic resource mobilization, the more effective engagement of a variety of players, especially from private sector, NGOs, and philanthropic organizations, will be key to close the finance gap.
This week at the Third International Financing for Development Conference in Addis Ababa, we’ve seen the birth of a new era in global health financing.
The World Bank Group, together with our partners in the United Nations, Canada, Norway, and the United States, just launched the Global Financing Facility in support of Every Woman Every Child. It’s hard to believe it’s been less than 10 months since the GFF was first announced at the 2014 UN General Assembly by World Bank Group President Jim Yong Kim, UN Secretary-General Ban Ki-moon, Prime Minister Stephen Harper of Canada and Prime Minister Erna Solberg of Norway. We’re grateful to the hundreds of representatives from developing countries, UN agencies, bilateral and multilateral development partners, civil society and the private sector who have contributed their time, ideas, and expertise to inform and shape the design of the GFF to get it ready to become operational.
This week in Addis Ababa, Ethiopia, during the Third International Financing for Development Conference, the United Nations, along with the World Bank Group, and the governments of Canada, Norway and the United States, joined country and global health leaders to launch the Global Financing Facility (GFF) in support of Every Woman Every Child. Partners announced that $12 billion in domestic and international, private and public funding had already been aligned to country-led five-year investment plans for women’s, children’s and adolescents’ health in the four GFF front-runner countries: Democratic Republic of the Congo, Ethiopia, Kenya and Tanzania.
Sub-Saharan Africa’s (SSA) impressive growth over the past decade or so has been matched by its equally impressive showing on the World Bank Group's "Doing Business" index. In 2012, one-third of the world’s top reformers on the index were from the continent, and every year its countries feature in the top 10 most active reformers. In 2014, five of the top 10 were from SSA.
Doing Business tracks progress in reforms that support a firm through its life-cycle, from start-up, through to raising capital, to potential closure. Through a mix of wide geographic coverage and rankings that generate a lot of public attention (not all of it wholly positive), the report has been a powerful motivator of investment climate reform, with the data serving as a useful means to measure progress made.
Doing Business as a start
While a large appeal of Doing Business as a measure of a country’s business environment is that it focuses on tangible business activities to which the private sector and policymakers can directly relate, its indicators are limited in scope. They are therefore intended to be used mainly as a litmus test of the state of a country’s investment climate. Therefore, while Doing Business's accessibility and global profile can be very useful in generating momentum for private sector reform, it ought to mainly serve as a starting point for a country to then engage in both broader reaching and deeper investment climate change. (This approach to the use of Doing Business has largely underpinned investment climate reform efforts in SSA by the Bank Group’s Trade and Competitiveness Global Practice.)
So, if Doing Business is a starting point and is used as such, is there evidence to support the assumption that it triggers wider and deeper private sector reform? Or is movement on Doing Businesses a starting point and, unintentionally, an ending point too?
Linkages to wider competitiveness reform data
One of the most comprehensive measures of the state of different countries’ business environments is the World Economic Forum’s (WEF) Global Competitiveness Index (GCI), a data set of over 110 variables that looks at the current state of, and tracks changes in, competitiveness across the world. The data set is structured under 12 pillars that cover measures from institutional development to technology and innovation.
Using GCI as a good measure of competitiveness, and interpreting changes in it as a reflection of a country’s effectiveness in engaging in wider competitiveness reform, we can look at the relationship between GCI and Doing Business and, significantly, the extent of movement on the two indices.
A high-level review of the relationship between changes in GCI and Doing Business for different regions between 2007 and 2013 shows SSA to have performed comparatively well on both indices, performing similarly to countries of Eastern and Central Europe and surpassing the world average. However, looking beyond averages to GCI’s specific pillars, SSA’s performance has been variable, advancing as a region in some areas more than others. Figure 1, below, shows GCI pillars where SSA has improved the most and the least, highlighting the top and bottom three.
Figure 1: Variations within competitiveness
(SSA score on GCI, total and select pillars)
Of particular interest is Pillar 6, Goods Market Efficiency, because many of the areas that this pillar tracks are also areas where the Bank Group has focused its investment climate reform interventions, from business entry and competition, to taxes, trade and investment. (Two of the 16 indicators in this pillar actually comprise Doing Business data – the number of procedures and days required to start a business.)
Pillar 6 is one of the top three GCI pillars that have the greatest upward pull on SSA’s overall performance on GCI, countering the areas where SSA has slipped in its scores.
Abebech, a single mother of three, in Arsi Negelle district in Ethiopia heads out for another shift at the construction site for gully embankments, part of a public works program offered by the Government of Ethiopia to address food insecurity.
Ethiopia’s Productive Safety Net Program (PSNP) reaches an estimated 9 million people across the regions of Amhara, Oromiya, Southern Nations, Nationalities, and Peoples Region, Tigray, Afar, Somali, Dire Dawa, and Harar. Food or cash payments are provided to very poor households. Payments are made in return for community work known as ‘public works’ – with participants working on soil and water conservation, construction of schools, health posts, childcare centers and road building. The work is scheduled usually after harvest season to ensure food security and enough money to carry through seasonal food shortages.
Poor households in Ethiopia face a series of economic, social and environmental risks and vulnerabilities with risks often higher for women. While women help with farming and related work, they also receive unequal access to resources, financing, training, and are also more vulnerable to household-related shocks -- illness, death of household member, drought, flood, price shocks, job loss, loss or death of livestock. Women in rural areas typically received poor education and are paid lower for the same type of work as their male counterparts.
Nighttime lights satellite imagery (DMSP-NTL) are now a popular data source among economists. In a sentence, these imagery encompass almost all inhabited areas of the globe, and record the average quantity of light observed at each pixel (nominal size ~1km2) across cloud-free nights for every year, 1992-2012. In under-developed or conflicted regions, where survey or census data at a fine level of spatial and temporal disaggregation are seldom available or reliable or comparable over space or time, NTL and other satellite imagery can be an excellent resource. Recent economics papers have used NTL to study growth of cities in sub-Saharan Africa (Storeygard (2015)), production activity in blockaded Palestinian towns of the West Bank (Abrahams (2015), van der Weide et al (2015)), and urban form in China (Baum-Snow & Turner (2015)) and India (Harari (2015)).