risks

Fixing Fraud in Public-Private Projects

Available in 中文

What’s a cash-tight government to do when it wants to modernize a hospital, build a railway, or expand the power grid to reach underserved areas? It might explore outside, private sources of financing—that’s where public-private partnerships (PPPs) come in. The acronym has a promising ring to it, yet going back to the 1970s, its impact has been mixed. At their best, PPPs can provide rapid injections of cash from private financiers, delivery of quality services, and overall cost-effectiveness the public sector can’t achieve on its own.

But at their worst, PPPs can also drive up costs, under-deliver services, harm the public interest, and introduce new opportunities for fraud, collusion, and corruption. Our experience at the World Bank Integrity Vice Presidency is that because PPPs most often are geared toward providing essential public services in infrastructure, health and education, the integrity risks inherent in these sectors also transfer to PPPs.

On April 17, the Integrity Vice Presidency convened a public discussion on corruption in PPPs (pdf) bringing together finance, energy, and fairness-monitoring perspectives. Looking at the landscape, in the last eight years, 134 developing countries have implemented PPPs in infrastructure, and in the last decade the World Bank has approved some $23 billion lending and risk guarantee operations in support of PPPs.

We need to move from arbitrary crisis response to systematic risk management: A perspective from WDR 2014

An old proverb cautions that “an ounce of prevention is worth a pound of cure.” There is a lot of truth to this: interventions to prevent infectious disease and infant malnutrition have repeatedly been estimated to have very high returns, with benefit-cost ratios as high as 15 to 1.

The proverb also applies outside health. Time and again, failure to prevent and prepare has tragic and costly consequences—economic and financial crises, natural disasters, ruinous health outcomes, social unrest—that often could have been avoided at moderate cost. In 2010, an earthquake in Haiti cost more than 220,000 lives, while one of much larger magnitude in Chile produced about 500 fatalities. Chile’s enforcement of building codes appears to account for much of the difference.

Managing Risk for Development

Suppose a political leader implements a policy that results in an economic crisis in the sense that, had he not implemented the policy in this instance, the crisis would not have occurred. In such a situation we are inclined to come down heavily on the leader’s policy and castigate the decision. This would however be a mistake.

To see the mistake—as to see so many things in life—it is worth converting this to a more abstract problem. A (fair) dice is about to be rolled; but before that you have to choose between A and B. If you choose A and the dice outcome is 1 or 2, or you choose B and the dice outcome is 3, 4, 5 or 6, all will be well. Otherwise, there is a major food crisis. What should you do? A little thought makes it clear that you should choose B. If after that the dice shows up on 1, there will of course be a crisis, but that disastrous outcome would not render your decision wrong. Indeed, if you had to play the game again, you should make the same choice.

Mongolia: what are the risks for an economy that's growing at 20 percent?

Available in: монгол хэл

There is good news coming out of Mongolia, the land of the eternal blue skies. The economy racked up a second quarter of high growth: the third quarter came in at 20.8 percent, topping the equally amazing second quarter of 17.3 percent (year-on-year GDP growth), as discussed in the World Bank's latest Mongolia Quarterly Update. And while this growth spurt originated in the mining sector, with Oyu Tolgoi—a mega copper and gold mine—getting ready to start producing in 2012 and a whole battery of other, smaller mines producing at full capacity, the high growth is quite broad-based. Even manufacturing is doing well.

Why Aren't Asset Managers Factoring in Climate Change?

There is a self-interested economic logic that often holds true for political questions relating to climate change. As reflected in the poll of public attitudes toward climate change commissioned by the WDR and published last month, citizens of the poorest countries—those most vulnerable to the physical impacts of climate change—are much more likely to rate climate change as “very serious” than are citizens of high-income countries, who possibly perceive themselves as less vulnerable. The shares ranking climate change as a very serious problem were: U.S. 31%, Japan 38%, and France 43%, in contrast to Senegal 72%, Kenya 75%, and Bangladesh 85%.

Yet, while the livelihoods of a fisherman in Senegal, a pastoralist in Kenya, and a rice farmer in Bangladesh’s delta might be the most immediately vulnerable to climate change, it’s worth noting that the assets of an insurance company on the U.S.’s Gulf Coast, a real estate investor in Japan, and a champagne-producing giant in France are vulnerable too.

New Bank report confirms East Asia remains robust amid global slowdown

In 2008, growth in China, the rest of East Asia and the Pacific, and other developing regions together will fall from 7.8 percent to a still-strong 6.5 percent while their high-income trading partners like the United States slow to between 1 and 2 percent and import less.

risks

You are here

RESOURCES FOR