Editor's Note: The following post was submitted jointly by Mohammad Amin and Arvind Jain, both of the World Bank Group's Enterprise Analysis Unit.
Eastern Europe and Central Asia
You might find it hard to believe, but high prices of onions can trigger the fall of the government in India. In 1998, a supply side shock led to a sharp increase in onion prices in the country and most notably, in the state of Delhi. In the following elections, the ruling party was routed in large part due to its failure to control the price of onions in the capital state. Today, onion prices in India are up again, rising by over 100% in just three weeks in December.
Most of the attention on governance in developing countries is on developing efficient rules and regulations. That is, given the social and economic priorities of a country, rules and regulations should work towards achieving priorities in the least costly way. However, another dimension of governance that must be discussed is accessibility of government officials to the public. Arguably, better access would increase transparency and help citizens and businesses voice their ideas and concerns, thereby allowing for more effective implementation of laws.
One can reasonably expect that frequent and unpredictable changes in economic policy might adversely affect investment by the private sector and the overall growth of the economy. For all practical purposes, uncertainty about future economic policies is a step towards economic anarchy. But precisely what causes firms in some countries to have higher uncertainty about future economic policies than others? Does the underlying political structure matter? What elements of the political structure, if any, matter for the level of policy uncertainty as perceived by private agents?
Survey data suggest it might not be that easy for manufacturing multinationals to find information on suitable industrial investment sites in many countries around the world.
2. The World Bank talks about failure (with a little help from a Google transplant)
3. Which country has the second highest number of gyms in the world (after the US)? (Hint: It belongs to the BRICs.)
That's my main takeaway from just-released data based on surveys of over 1,800 firms in eastern Europe. In mid-July 2009, firms in six countries were asked whether they had seen an increase, decrease, or no change in sales from the previous year. The numbers then were not pretty—75% of firms reported a decrease in sales (based on an average of country-level data).
The World Bank's Enterprise Surveys team has published a new survey of businesses in Eastern Europe, analyzing the long-term effects of the financial crisis in the region. The report looks at survey data collected last summer from over 1,600 firms in Bulgaria, Hungary, Latvia, Lithuania, Romania and Turkey, finding that the crisis has had a detrimental effect on demand: