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business environment

ICT essentials for rebuilding fragile states

Mark Jamison's picture
Photo credit: STARS/Flickr
Enabling a robust market for information and communications technologies (ICTs) is fundamental to rebuilding fragile and conflict affected states (FCSs) and addressing the human suffering. As I have explained elsewhere, ICTs are critical because they can be used to alert people to renewed violence, build community, restart the economy, and facilitate relief efforts. The critical strategies that enable ICTs are protection of property rights and minimal barriers to competition.
 
South Sudan provides examples of the importance of ICT. Whitaker Peace & Development Initiative’s Youth Peacemaker Network tells the stories of John from Twic East Country whose life was spared by a phone call warning of an impending attack, and of Gai Awan, Artha Akoo Kaka, and Moga Martin from Numule whose ICT trainings opened employment and education opportunities. The United Nations High Commissioner for Refugees (UNHCR) explains how ICT can help protect refugees: Biometrics enabled Housna Ali Kuku, a single mother of four, to obtain precisely scheduled treatments for her respiratory tract infection and for her children. GPS is used to identify sources of diseases and to track their spread.
 
A World Bank study by Tim Kelly and David Souter identified five themes in post-conflict recovery and how ICT plays critical roles.

All text messages are not created equal

Pierre Guislain's picture
Photo credit: Adam Fagen/Flickr
Eight months after the launch of the World Development Report 2016 on Digital Dividends, I am happy to report that our efforts to operationalize the findings are well under way. For digital technologies to benefit everyone everywhere, affordable access to broadband internet is key. This requires both robust broadband infrastructure, and the strengthening of analog complements to digital solutions, including a pro-competitive and effective regulatory framework, a sound business environment, good governance and digital skills.

One of our main areas of focus is the enabling environment – helping governments foster digital development by putting in place the right policies and regulations.

Now, what are some of the main issues?

First, across the world, but especially in developing countries, competitiveness continues to be dragged down by ‘red tape’, including numerous procedures, authorizations and delays to start a business or launch a service, costly and unreliable property registration, or stifling labor regulations. I am sure you are all familiar with the Doing Business report and the World Bank’s many programs to support business reforms worldwide.

While the digital industry also faces these regulatory hurdles, it is confronted with additional challenges.

Let me give you an example. With your phone in hand, you are about to send a text message to a friend. Your phone offers you a choice: to send the text message through your mobile operator, or to send it via the internet through an app. Depending on what platform you use, your text message will be taxed differently. All text messages are not created equal: different digital services are treated differently from a regulatory and fiscal point of view, with no real level playing field.

Keeping pace with digital disruption: Regulating the sharing economy

Cecile Fruman's picture
Globalization in the 21st century is increasingly driven by digitization, as is described in new research by the McKinsey Global Institute. MGI's recent report notes that, since 2007, trade flows have slowed and financial flows have not fully recovered while digital information flows have soared. [See Footnote 1.]

The World Economic Forum describes this transformation as the “Fourth Industrial Revolution,” because the speed and extent of disruption is unprecedented.

A key trend of this revolution is the emergence of technology-enabled, peer-to-peer and business-to-peer platforms that facilitate commerce. These platforms – most commonly referred to as the “sharing economy” or the “collaborative consumption economy” – have grown exponentially in recent years, disrupting existing industry structures and value chains in developed and emerging markets.

Notably, growing internet and mobile penetration catalyzed the growth of disruptive firms and innovations, such as Uber and Airbnb, in a number of middle-  and low-income countries. However, as highlighted by the 2016 World Development Report, for this digital revolution to be inclusive, and for it produce dividends for the poor, its “analog complements” – such as the institutions that are accountable to citizens and the regulations that enable workers to access and leverage this new economy – should also be in place.

The global proliferation of these collaborative platforms poses new challenges for regulators trying to keep pace with rapidly evolving business models. This issue was at the heart of discussions between former Head of Public Policy at Facebook, Uber and DJI, Corey Owens, and Professor of Law at Howard University and former regulator at the Federal Trade Commission, Andy Gavil, at the 2016 Business Environment Forum that took place in Washington from May 17 to 19.
 




 

Why Juba?

Jean Lubega-Kyazze's picture
Construction in Juba
 
The World Bank Group continues to engage in South Sudan despite the odds, and for good reason

Tell people you work in Juba – capital of South Sudan and now the newest member of the East African Community – and more often than not they won’t know where to find it on a map. Those of us who know are often met with doubtful stares when we talk about enhancing trade and competitiveness in a country that is struggling to emerge from decades of grueling civil war, not to mention a 98 percent illiteracy rate, inadequate capacity, a maternal mortality rate of 254 for every 100,000 births and a 250 out of 1,000 infant mortality rate.

Fact is, Juba is situated in the heart of Africa, where such challenges, and the daunting figures that go along with them, exist. But look deeper and you see commitment, potential, and signs of the World Bank Group’s positive impact. In short, you see opportunity.

Halting the 'race to the bottom’ in corporate conduct: Governance reform, focus on ethics must repair the damage

Christopher Colford's picture

When terms like “criminal conspiracy” and “felony” appear in confessions and plea bargains, the criminal-justice system sits up and takes notice. And when the confessed felons are some of the world’s largest corporations, the private sector ought to be jolted into action, too.

The continuing shame of confessed corporate misconduct – in this case, lawbreaking conducted with such a degree of guile that the U.S. Attorney General called it “breathtaking flagrancy” and that the FBI labeled it criminality “on a massive scale” – reached a new intensity this month: Four of the world’s largest banks confessed to taking part in a five-year-long conspiracy to manipulate the world’s foreign-exchange markets.

This latest in a series of stern legal judgments has damaged the corporate reputations of some of the world’s most pivotal financial institutions – with guilty pleas, to felony charges no less, entered by Citicorp, JPMorgan Chase & Co., Barclays PLC and The Royal Bank of Scotland PLC. A separate guilty plea by UBS – along with earlier fines against Bank of America and HSBC in separate settlements in related cases – has brought the total of fines against those once-trusted, now-tarnished firms to about $6 billion.

The corporate confessions of deliberate lawbreaking, pursued with systematic and sinister stealth – at the very center of the international financial system – vividly validate the recent exhortation of Christine Lagarde of the International Monetary Fund: that corporate governance must be strengthened and that a higher standard of individual ethics must prevail, especially in the financial sector.

Lagarde wisely linked skewed incentives and a short-term profit-maximization mindset to the risk of financial instability, in an eloquent recent address to the Institute for New Economic Thinking’s conference on “Finance and Society”: “There is still work to be done to address distorted incentives in the financial system. Indeed, actions that precipitated the [global financial] crisis were – mostly – not so much fraudulent as driven by short-term profit motivation. This suggests to me that we need to build a financial system that is both more ethical and oriented more to the needs of the real economy – a financial system that serves society, and not the other way round.”

Those who champion the creative potential of the private sector (including, I imagine, the regular readers of this blog) have a particular reason – one might even say, a special responsibility – to voice their anger about the foreign-exchange-rigging scandal and other acts of lawlessness.

Idealists who esteem the private sector’s ingenuity in delivering growth and jobs sans frontières know that business' creativity will be indispensable in achieving the vital development goals of eliminating extreme poverty and promoting shared prosperity. Society thus rightly expects that the full measure of corporate energies should be focused on companies’ central mission of generating wealth that benefits all of society. Whenever any of those energies are diverted – especially toward criminal schemes that put short-term personal plunder ahead of long-term economic growth – the lawbreakers undermine public confidence (or what little remains of it, in the wake of the global financial crisis) in the fairness of the economic system.

Moreover, lawbreakers provide ammunition to critics who allege that today’s economic system is irredeemably corrupt, through-and-through – thus making it even more difficult for law-abiding companies, holding true to the values of honest business behavior, to make the case for policies that liberate private-sector dynamism.

Piggybanks for plunder: Corrupt cash flows to Global Cities, requiring transparency and complete disclosure of assets

Christopher Colford's picture



Corrupt cash from secretive international sources – deliberately funneled through ‘shell companies’ to conceal the money’s illicit origins – is often used to buy ‘Towers of Secrecy’ in leading global cities like New York, as documented by a recent New York Times investigation.

Cities exert a magnetism that’s irresistible – attracting not just the most ambitious who seek economic opportunity and the most creative who revel in cultural richness, but also lawbreakers and looters: notably nowadays, the corrupt kleptocrats and tax-avoiding oligarchs whose hot money increasingly flows into the safe haven of prime real estate in the world’s leading cities.

At least part of the trend toward soaring center-city property prices, according to many anticorruption monitors, is due to the impact of illicit financial flows. It’s not just the plutocratic One Percenters who are steadily bidding up real-estate valuesPlunderers and profiteers – often concealing their identities, with the aim of shielding their wealth from tax authorities and international asset-trackers – use prestigious parcels of center-city property as a piggybank to shelter their tainted lucre.

The most vibrant and most competitive of Global Cities – notably London, Paris, New York, Hong Kong and Singapore – have long been magnets for money, luring the world’s most enterprising entrepreneurs as well as its most desperate refugees. As their global vocation and vitality have lured the ambitious and the avaricious, however, the “priced out of Paris” syndrome has often taken over: Gentrification has morphed into “plutocratization,” notes Simon Kuper of The Financial Times, with “global cities turning into vast gated communities where the One Percent reproduces itself.”

Meanwhile, “the middle classes and small companies [are] falling victim to class-cleansing," Kuper asserts. "Global cities are becoming patrician ghettos” – with the middle class and the poor being driven ever-further out from the center-city in search of affordable housing, doomed to interminable commutes to sterile suburbs or brooding banlieues.

Most of the property price spiral in world-leading cities is surely attributable to the allure of cosmopolitan life in an age when urbanization is accelerating worldwide. But as two members of the World Bank Group’s unit on Financial Market Integrity (FMI) and the Stolen Asset Recovery (StAR) Initiative recently wrote in a StAR blog post, the melt-up of prime property prices often involves corrupt money and evasive property-registration practices.

Citing a recent New York Times investigative series that meticulously documented suspicious practices within Manhattan real-estate trends, FMI specialists Ivana Rossi and Laura Pop noted that the property-buyers “took several steps to hide their identity as the real owners of the properties. Some of these steps involved buying condos through trusts, limited liability companies or other entities that shielded their names. Such tactics made it very hard to identify the 'beneficial owner': to figure out who owned what, or who was the ultimate controller of a company (or other legal entities) since the names were not shown in the company records.”

Vast sums are flowing unchecked around the world as never before – whether motivated by corruption, tax avoidance or investment strategy, and enabled by an ever-more-borderless economy and a proliferation of ways to move and hide assets,” said the painstaking New York Times investigation, "Towers of Secrecy," by Louise Story and Stephanie Saul.

Probing “the workings of an opaque economy for global wealth,” the reporters excavated the substrata of this enduring scandal. “Lacking incentive or legal obligation to identify the sources of money, an entire chain of people involved in high-end real-estate sales – lawyers, accountants, title brokers, escrow agents, real-estate agents, condo boards and building workers – often operate with blinders on.”

In a moment of inadvertent self-revelation, a Manhattan real-estate broker confessed her look-the-other-way negligence “when vetting buyers: ‘They have to have the money. Other than that, that’s it. That’s all we need.’ ” A former executive of a property-development firm was equally blunt: “You pretty much go by financial capacity. Can they afford it? They sign the contract, they put their money down with no contingency, and they close. They have to show the money, and that is it. I don’t think you will find a single new developer where it’s different.”

No wonder that the upper reaches of the U.S. real-estate market are “more alluring for those abroad with assets they wish to keep anonymous,” the Times analysis found. “For all the concerns of law-enforcement officials that ‘shell companies’ can hide illicit gains, regulatory efforts to require more openness from these companies have failed.”      

The Times’ discoveries, asserted Rossi and Pop, thus underscore the important issues involved in asset disclosure and "beneficial ownership” rules. Many nations require that public officials fully disclose their financial holdings. Such transparency is one important safeguard against the plundering of public wealth by kleptocrats, corrupt clans or well-connected cronies in countries that are vulnerable to chronic larceny.

Yet some dishonest public officials exploit legal loopholes – or flout the law entirely: “As the StAR publication ‘Puppet Masters’ demonstrated, those that do engage in corrupt activities are likely to use entities such as companies, foundations and trusts to hide their ill-gotten wealth,” wrote Rossi and Pop. “These conclusions are also confirmed by a recent Transparency International UK report. It showed that 75 percent of UK properties in the UK, under criminal investigation since 2004 – as the suspected proceeds of corruption – made use of offshore corporate secrecy to hide the owner’s identities.”

Drawing on a new World Bank Group report (which they co-authored with Francesco Clementucci and Lina Sawaqed), “Using Asset Disclosure for Identifying Politically Exposed Persons,” Rossi and Pop argued that accurate and complete financial disclosure by officials in positions of public trust (known in the financial-integrity world as “Politically Exposed Persons”) are an essential safeguard against the diversion of assets. Such disclosures, by themselves, don’t provide a “magic bullet” solution to prevent corruption, yet they are a vital mechanism in building transparency and trust.

“Once there is an ongoing investigation, the information declared can be very helpful as evidence, both in what has been included as well as omitted,” wrote Rossi and Pop. “In many countries, intentionally leaving out information on a house or a bank account carries serious penalties. Furthermore, financial disclosures can help catch a dishonest public official whose lavish lifestyle – including real estate in a prized location – could not be supported by the resources, such as a public-sector salary, indicated in the declaration.” The key factor in ensuring integrity and combating corruption is thus the full disclosure of “beneficial ownership.”

Property prices in Global Cities are already being propelled upward by the gusher of money that is flooding, through fully legal channels, into the world’s most desirable and stable locations – thus threatening to put affordable housing, in many major cities, beyond the reach of all but the fortunate few. The last thing that already-unaffordable cities need is an unchecked flood of illicit billions and furtive real-estate transactions, which will only intensify the pressure that now threatens to create a renewed boom-and-bust cycle of unstable housing prices.

Urban advocates who are working to promote inclusive, sustainable, resilient and competitive cities will applaud the continued vigilance of asset-trackers and corruption-hunters – like the FMI and StAR units, through their work sans frontières
on the disclosure of beneficial ownership – whose efforts to halt illicit financial flows will provide an additional instrument to help ensure that cities will be as inclusive as possible in a relentlessly urbanizing age.

 

#TakeOn Corruption


Davos Sees Challenges, ‘Smart Cities’ Seize Opportunities: Finding Sustainable Solutions Via Public-Private Dialogue

Christopher Colford's picture



As the world’s policymakers and business leaders converge in Davos, Switzerland for tomorrow’s opening of the World Economic Forum, there’s certainly no shortage of global threats for them to worry about during the WEF’s annual marathon of policy seminars and economic debates. A world of anxiety enshrouds this week’s conference theme of the “New Global Context,” judging by the WEF’s latest Global Risks Report: Its analysis of 28 urgent threats and 13 ominous long-term trends offers a comprehensive catalogue of extreme dangers to social stability and even human survival.

As if the Davos data isn’t worrisome enough, several just-issued scientific studies – which document worsening trends in climate change, humanity’s imminent collision with the limits of the planet’s resilience and the intensifying damage being wrought by voracious consumption-driven growth – trace a relentlessly gloomy trajectory.

Relieving some of the substantive tension, there’s also often a puckish undercurrent within each year’s Davos news coverage. Poking holes in the self-importance of Davos’ CEOs and celebrities – with varying degrees of lighthearted humor or reproachful reproof – has become a cottage industry, springing up every January to chide the mountaintop follies of “the great and the good.” Skeptics often scoff that the lofty pronouncements of Davos Deepthink have become almost a caricature of elite self-importance, and there’ll surely be plenty of the customary sniping at the insularity of Davos Man and at the insouciance of the globalized jet set as its over-refined One Percent folkways become ever more detached from the struggles of the stagnating middle class and desperate working poor.

Despite such Davos-season misgivings, it’s worth recalling the value of such frequent, fact-based knowledge-exchange events and inclusive dialogues among business leaders and thought leaders. Some of the Davos Set may revel in after-hours excess – its Lucullan cocktail-party scene is legendary – yet the substantive centerpiece of such meetings remains a valuable venue for expert-level policy debates, allowing scholars to inject their ideas straight into the bloodstream of corporate strategy-setting. The global policy debate arguably needs more, not fewer, thought-provoking symposia where decision-makers can be swayed by the latest thinking of the world’s academic and social-sector experts. Judging by the fragmented response to the chronic economic downturn by the global policymaking class, every multilateral institution ought to host continuing consultations to help shape a coherent policy agenda.

Focusing on just one area where in-depth know-how can serve the needs of decision-makers: The World Bank Group has long been tailoring world-class knowledge to deliver local solutions to client countries about one of the trends singled out in this year's WEF list of long-term concerns – the worldwide shift from “predominantly rural to urban living.” The biggest mass migration in human history has now concentrated more than 50 percent of the world’s population in cities, leading this year’s Global Risks Report to assert that the risk of failed urban planning is among the top global concerns.

“Without doubt, urbanization has increased social well-being,” commented one WEF trend-watcher. “But when cities develop too rapidly, their vulnerability increases: pandemics; breakdowns of or attacks on power, water or transport systems; and the effects of climate change are all major threats.”

Yet consider, also, the potential opportunities within the process of managing that trend toward ever-more-intense urban concentration. What if the prospect of chaotic urbanization were able to inspire greater city-management creativity – so that urban ingenuity makes successful urbanization a means to surmount other looming dangers?

For an example of the can-do determination and trademark optimism of the development community – with the world’s urbanization trend as its focus – consider the upbeat tone that pervaded a conference last week at the World Bank’s Preston Auditorium, analyzing “Smart Cities for Shared Prosperity.” With more than 850 participants in-person, and with viewers in 92 countries watching via livestream, the conference – co-sponsored by the World Resources Institute (WRI), Embarq, and the Transport and Information & Communications Technology (TICT) Global Practice of the World Bank Group – energized the world’s leading practitioners and scholars across the wide range of transportation-related, urban-focused, environment-conscious priorities.

(Thinking of the Preston gathering’s Davos-season timing and full-spectrum scope: It sometimes strikes me that – given the continuous procession of presidents, professors, poets and pundits at the Preston podium – there could be a tagline beneath Preston's entryway, suggesting that the Bank Group swirl of ideas feels like “Davos Every Day.”)

Amid its focus on building “smart cities” and strengthening urban sustainability, the annual Transforming Transportation conference took the “smart cities” concept beyond its customary focus on analyzing Big Data and deploying the latest technology-enabled metrics. By investing in “smart” urban design – and, above all, by putting people rather than automobiles at the center of city life – the scholars insisted that society can reclaim its urban destiny from the car-centric, carbon-intensive pattern that now chokes the livability of all too many cities.

The fast-forward series of “smart cities” speeches and seminars reinforced the agenda summarized by TICT Senior Director Pierre Guislain and WRI official Ani Dasgupta – formerly of the Bank Group and now the global director of WRI’s Ross Center on Sustainable Cities – in an Op-Ed commentary for Thomson Reuters: “We can either continue to build car-oriented cities that lock in unsustainable patterns, or we can scale up existing models for creating more inclusive, accessible and connected cities. Pursuing smarter urban mobility options can help growing cities leapfrog car-centric development and adopt strategies that boost inclusive economic growth and improve [the] quality of life.”

Fostering Private Sector Development in Fragile States: A Piece of Cake?

Steve Utterwulghe's picture
Private sector development (PSD) plays a crucial role in post-conflict economic development and poverty alleviation. Fragile states, however, face major challenges, such as difficult access to finance, power and markets; poor infrastructure; high levels of corruption; and a lack of transparency in the regulatory environment. 

The private sector has demonstrated its resilience in the face of conflict and fragility, operating at the informal level and delivering services that are traditionally the mandate of public institutions. However, in post-conflict situations, PSD can have predatory aspects, thriving on the institutional and regulatory vacuum that prevails. The private sector will need to create 90 percent of jobs worldwide to meet the international community’s antipoverty goals, so pro-poor and pro-growth strategies need to focus on strengthening the positive aspects of PSD, even while tackling its negative aspects.

Coordinated reform efforts are key to develop the East African Community

Nina Paustian's picture


Business reforms can spur economic dynamism in the East African Community

East Africa is famous for its breathtaking landscapes and its unique concentration of wild animals. Could it also become as famous for its dynamic economic development?

In 2009 I came to Tanzania to work on tax harmonization in the East African Community (EAC). The Common Market Protocol was about to be signed and one of the biggest goals was to tap into the economic potential of the region by facilitating (cross-border) trade and improving the business climate. A year later, the five Partner States of the East African Community ratified the Common Market Protocol in order to realize “accelerated economic growth and development through the attainment of the free movement of goods, persons, labor, the rights of establishment and residence and the free movement of services and capital”. The overarching goal of the East African Community is to achieve sustainable economic growth in order to increase employment and reduce poverty.

In Latin America & the Caribbean, Market Efficiency Rules!

David Francis's picture

In Spanish

Broadly taken, Latin America and the Caribbean (LAC) weathered the turmoil of the global economic crisis fairly well. After the region’s GDP growth slowed notably in 2008, and fell to negative levels in 2009, growth returned to relatively robust, positive rates by 2010. What’s more, this bounce-back in GDP aligned closely with trends in the private sector.  

Value added, as a percentage of GDP, in both manufacturing and services, returned quickly from negative levels in 2009 to positive growth by 2010; over the same period, government consumption remained comparatively flat.

In other words, if you want to understand LAC’s recent pattern of economic growth, look at the private sector.

Data from the World Bank Group’s Enterprise Surveys put together a wealth of information, gathered directly from private sector firms’ experiences, to create a picture of the business environment around the world.  For our recent work in LAC, the project surveyed nearly 15,000 business owners and top managers in 31 countries, including interviews conducted by re-visiting thousands of businesses in 15 countries, where the surveys were also conducted in 2006.


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