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Governance

Keeping the lights on– workable and unworkable approaches to electricity sector reform

Brian Levy's picture

Lethaba Power Station, South AfricaTwo decades ago, when I was working on utility sector reform we knew the answer. Here (using the example of electricity) is what it was: unbundle generation, transmission and distribution; introduce an independent regulator; rebalance prices; privatize. Two decades later, we have learned the stark limits of orchestrating reforms on the basis of ‘best practice’ blueprints such as these.

What would a more ‘with the grain’ approach to electricity sector reform look like? To explore this, I asked my Johns Hopkins SAIS and University of Cape Town students to review how a variety of country efforts unfolded in practice – focusing specifically on efforts to introduce private sector participation into electricity generation. Some striking patterns emerged.  Here I contrast South Africa’s experience with those of Kenya, Peru and Lebanon. The former illustrates powerfully the hazards of ‘best practice’ reforms; the latter point to the promise of  more incremental, cumulative, with the grain approaches.

In 1997, an official South African report signaled that in 2008 the lights would go out if there was no new investment in electricity generation; the report proposed that the country embark on a far-reaching effort to implement the ‘best practices’ template for electricity sector reform, constraining the dominant parastatal, ESKOM, and turning to the private sector for new investment in electricity generation. In 1998, the government adopted the report’s recommendations. In her richly-researched Masters dissertation (available on the link that follows), Nchimunya Hamukoma detailed what happened next.

Contestation over the agenda among competing factions within the ruling African National Congress and its allies interacted with a hugely-ambitious reform design — one for which almost none of the requisite political, institutional, economic and organizational capabilities were in place. The result was that after six futile years of trying, the effort at restructuring and private participation was abandoned, and ESKOM was given a green light to invest in new capacity. But the six lost years – the result of futilely pursuing an unachievable ‘best practice’ chimera – had an inevitable consequence. In 2008, as predicted, the lights went out.

Resilient Communities: What does it take to curb violence in cities?

Paula Rossiasco's picture

Photo: Make Noise not Art/Flickr
Almost five years ago in a discussion with urban experts from several Latin American and African countries, an important question was asked: how do we curb increasing levels of crime and violence in some of the fastest urbanizing countries in the world?
 
To explore this query, we embarked on a cross-country analysis of cities in West, Central and East Africa, seeking to not only better our understanding of urban fragility, crime, and violence, but also identify critical entry points to curb the challenges we would find. In the report Urban Fragility and Violence in Africa: A Cross-country Analysis, we explored one of the most recently relevant but less explored dimensions of fragility and violence in Africa: urbanization.
 
The world is urbanizing at staggering, unprecedented rates. By 2014, 54% of the world’s population was residing in urban areas. This number is projected to grow to 66% by 2050. Today’s large cities are concentrated in developing countries, with medium-sized African and Asian cities as the fastest growing urban agglomerations. People migrate fervently to urban areas with hopes of higher per capita incomes, increased employment levels, improved living conditions and well-being, and better chances to integrate into the national territorial economy.
 
Unfortunately, this promise has yet to be fulfilled in many cities. Often, the urbanization process is poorly managed and the mismatch between the growing number of migrants and the institutional and infrastructural capacity of cities is large. Experts argue that “the pace of urbanization, together with its sheer scale, is likely to stress national and urban institutions in many developing countries to their breaking point."

Where are the ‘Digital Dividends’ from the ICT revolution? The new World Development Report

Duncan Green's picture

© John Stanmeyer/National Geographic Creative. Used with the permission of John Stanmeyer/National Geographic Creative. Further permission required for reuse.Earlier this month I headed off for the London launch of the 2016 World Development Report, ‘Digital Dividends’. The World Bank’s annual flagship is always a big moment in wonkland, and there has been a lot of positive buzz around this one.

Here’s how the Bank summarizes its content (Frequently Asked Questions, pg. 5):

"What is the Report about? It explores the impact of the internet, mobile phones, and related technologies on economic development.

What are the digital dividends? Growth, jobs, and services are the most important returns to digital investments." (pg. 5)

How do digital technologies promote development and generate digital dividends? By reducing information costs, digital technologies greatly lower the cost of economic and social transactions for firms, individuals, and the public sector. They promote innovation when transaction costs fall to essentially zero. They boost efficiency as existing activities and services become cheaper, quicker, or more convenient. And they increase inclusion as people get access to services that previously were out of reach.

Why does the Report argue that digital dividends are not spreading rapidly enough? For two reasons. First, nearly 60 percent of the world’s people are still offline and can’t fully participate in the digital economy. There also are persistent digital divides across gender, geography, age, and income dimensions within each country. Second, some of the perceived benefits of the internet are being neutralized by new risks. Vested business interests, regulatory uncertainty, and limited contestation across digital platforms could lead to harmful concentration in many sectors. Quickly expanding automation, even of mid-level office jobs, could contribute to a hollowing out of labor markets and to rising inequality. And the poor record of many e-government initiatives points to high failure of ICT projects and the risk that states and corporations could use digital technologies to control citizens, not to empower them.

No movie, no map, no money: Local road financing innovations in the Philippines

Kai Kaiser's picture
Access to paradise? Photo by authors.

GoPro videos have become ubiquitous among mountain bikers. The more adventurous the journey the better. Go viral on social media, and you have a winner. You might even get a payout from YouTube. But we want to discuss another way to make money. Money for local roads in the Philippines. We want to discuss a way that officials and citizens could make a GoPro-type movie, convert it into a digital map, and possibly receive a payout from the Department of Budget and Management under a new program called Kalsada.
 
It’s More Fun in The Philippines!
 
The Philippines is a tropical archipelago of over seven thousand islands, making for many jewel destinations. The country’s tourism slogan “It’s More Fun in the Philippines” tries to capture the spirit of a friendly, welcoming and fun-loving people which the adventurous tourist will experience. Palawan was recently voted as the planet’s best island destination by a top travel magazine. In search of fun, we tried to visit one of its towns, Port Barton, two years ago. But chronic infrastructure means that sometimes you are in for a rough ride. Confronted with bad roads, we were only able to actually make it to this idyllic destination many months later.

Remittances and integrity: how to exist in harmony

Emily Rose Adeleke's picture

Page also available: French, Spanish



How do countries ensure that remittance service providers – who are often serving the world’s poorest people – mitigate their risk for abuse by money launderers and terrorist organizations?
 
This important question is addressed by new Guidance from the Financial Action Task Force (FATF), the international standard-setting body for anti-money laundering and combating the financing of terrorism (AML/CFT).
 
The United Nations estimates that developing countries received over US$400 billion in remittances from migrants living abroad in 2014. These funds are often the first financial service that migrants and their families use, so it is important that people can send and receive funds with relative ease and at reasonable cost. However, remittance service providers and the governments that supervise them, must ensure that they are not abused by parties undertaking illegitimate activities such as money laundering or terrorist financing.  

To grow sustainably, cities first need to get their finances right

Ede Ijjasz-Vasquez's picture
Local and municipal governments often operate with limited financial resources, yet they are responsible for delivering an ever-expanding range of infrastructure and services. In many countries, decentralization also tends to put additional pressure on municipal finances, as cities and towns are increasingly expected to take the lead in implementing national policies locally. Yet, this transfer of responsibilities from the national to the local level often does not come with an adequate transfer of resources.
 
In other words, cities are expected to "do more with less"... This can only happen if local government practitioners have the right tools and knowledge to manage their resources as strategically and efficiently as possible. To help cities get their financial house in order, the World Bank has developed the Municipal Finances Handbook (available in English and Spanish), which provides government officials with extensive guidance on controlling expenditures, strengthening revenues, mobilizing external funds, achieving creditworthiness, and adopting good borrowing practices.
 
Lead Urban Specialist Catherine Farvacque-Vitkovic tells us more about the handbook and the associated e-learning course: “Municipal Finances - A Learning Program for Local Governments”.
 
Please note the next edition of our online course will run from March 30 - May 23, 2016. Click here to learn more and sign up (registration ends March 30).

Building alliances, gaining public trust: Chile’s financial management reforms

Dmitri Gourfinkel's picture

Also available in: Español

Santiago de Chile. Photo: alobos Life via Flickr (under CC license) 


Note from the editors: The following is an interview with Patricia Arriagada, former acting Comptroller General of Chile, and Patricio Barra Aeloiza, Head of Accounting Analysis Division of the Comptroller General Office, who have been instrumental in recent reforms of public financial management systems in Chile.

Starting in 2010, Chile embarked on a journey to improve public sector accounting by converging to an international standard of financial reporting by 2016. The country expects to produce its first fully compliant financial statements in 2019. One main objective of this reform is to ensure that financial information generated by the government accounting system is comprehensive, reliable, and useful for decision-making. Another is to increase the levels of fiscal and financial transparency and accountability in the public sector.
 

Patricia Arriagada,
former acting Comptroller General
of Chile

These reforms were driven by the Comptroller General office, is what is known as a “Supreme Audit Institution,” and is responsible for monitoring revenues and expenditures in all parts of the government – in particular, ensuring the quality and credibility of financial management and financial reporting.

Competitive Cities: Changsha, China – coordination, competition, construction and cars

Z. Joe Kulenovic's picture

Cites are the heartbeat of the global economy. More than half the world’s population now resides in metropolitan areas, making a disproportionate contribution to their respective countries’ prosperity. The opportunities and challenges associated with urbanization are quite evident in the world’s most populous country, whose cities are among the largest and most dynamic on Earth. To better understand what a thriving metropolitan economy looks like in the Chinese context, our Competitive Cities team selected Changsha, the capital of Hunan Province, for inclusion among our six case studies of economically successful cities, as the representative of the East Asia Pacific Region.  
 
As recently as the turn of the millennium, Changsha’s economy was still dominated by low-value-added, non-tradable services (e.g. restaurants and hair salons) – an economic structure commonly seen today in many low- to lower-middle-income cities. Since then, Changsha has achieved consistently high, double-digit annual growth in output and employment, despite its landlocked location and few natural or inherited advantages, such as proximity to trade routes or mineral wealth. With per capita GDP surging from US $3,500 in 2000 to more than US $15,000 in 2012, Changsha has accomplished a feat so many other World Bank clients can only dream of: leapfrogging from lower-middle-income to high-income status in barely a decade, and an economy now comprised of much more sophisticated, capital-intensive industries. 

  

Photos via Google Maps

We took a closer look at the success factors behind this city’s dramatic growth story, and what lessons its experience may hold for cities elsewhere, especially in terms of (1) how to overcome coordination failures and bureaucrats working in silos and (2) how to ensure a level playing field for all firms in the city (that is to say, competition neutrality), even in industries with a strong SOE presence – something still not commonly seen in China these days.
 
Changsha’s (and Hunan’s) growth has clearly benefitted from a highly conducive national macroeconomic and policy framework, including a plan entitled The Rise of Central China, aimed at spurring development in areas beyond the country’s booming coastal regions. This and other initiatives provided for the removal of investment restrictions, more favorable tax treatment, and enhanced infrastructure and connectivity to coastal commercial gateways. China’s massive stimulus plan in 2009 (in response to the global financial crisis and recession) jump-started construction activity in the country, providing further impetus to one of Changsha’s principal industries, construction machinery and equipment manufacturing. And national government interventions in earlier decades – especially the establishment of dedicated research institutes – provided a critical contribution to Changsha’s accumulation of expertise in such disciplines as machinery or metallurgy.
 
Notwithstanding these national initiatives, responsibility for local economic development in China is highly decentralized, with municipal government leaders directly tasked with achieving GDP growth and tax revenue targets. Municipal governments also have rights over almost all land in cities, which can be leased or used as collateral to fund local infrastructure. In Changsha, municipal authorities used these prerogatives to improve their city’s economic competitiveness.

Four ways open data is changing the world

Stefaan Verhulst's picture

Library at Mohammed V University at Agdal, RabatDespite global commitments to and increasing enthusiasm for open data, little is actually known about its use and impact. What kinds of social and economic transformation has open data brought about, and what is its future potential? How—and under what circumstances—has it been most effective? How have open data practitioners mitigated risks and maximized social good?

Even as proponents of open data extol its virtues, the field continues to suffer from a paucity of empirical evidence. This limits our understanding of open data and its impact.

Over the last few months, The GovLab (@thegovlab), in collaboration with Omidyar Network (@OmidyarNetwork), has worked to address these shortcomings by developing 19 detailed open data case studies from around the world. The case studies have been selected for their sectoral and geographic representativeness. They are built in part from secondary sources (“desk research”), and also from more than 60 first-hand interviews with important players and key stakeholders. In a related collaboration with Omidyar Network, Becky Hogge (@barefoot_techie), an independent researcher, has developed an additional six open data case studies, all focused on the United Kingdom.  Together, these case studies, seek to provide a more nuanced understanding of the various processes and factors underlying the demand, supply, release, use and impact of open data.

After receiving and integrating comments from dozens of peer reviewers through a unique open process, we are delighted to share an initial batch of 10 case studies, as well three of Hogge’s UK-based stories. These are being made available at a new custom-built repository, Open Data’s Impact, that will eventually house all the case studies, key findings across the studies, and additional resources related to the impact of open data. All this information will be stored in machine-readable HTML and PDF format, and will be searchable by area of impact, sector and region.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.


Middle-Class Heroes: The Best Guarantee of Good Governance
Foreign Affairs
The two economic developments that have garnered the most attention in recent years are the concentration of massive wealth in the richest one percent of the world’s population and the tremendous, growth-driven decline in extreme poverty in the developing world, especially in China. But just as important has been the emergence of large middle classes in developing countries around the planet. This phenomenon—the result of more than two decades of nearly continuous fast-paced global economic growth—has been good not only for economies but also for governance. After all, history suggests that a large and secure middle class is a solid foundation on which to build and sustain an effective, democratic state. Middle classes not only have the wherewithal to finance vital services such as roads and public education through taxes; they also demand regulations, the fair enforcement of contracts, and the rule of law more generally—public goods that create a level social and economic playing field on which all can prosper.
 

Humanitarian reform: What's on - and off - the table
IRIN News
As pressure mounts to come up with concrete proposals for the future of humanitarian aid, horse-trading and negotiations have begun in earnest behind the scenes in the lead-up to the first ever World Humanitarian Summit (WHS), to be held in Istanbul in May. The release this week of the UN secretary-general’s vision for humanitarian reforms marks one of the last stages in a multi-year process that has seen consultations with some 23,000 people around the world on how to improve crisis response. (See: Editor’s Take: The UN Secretary General’s vision for humanitarian reform)  Hundreds of ideas are floating around. Which are now rising to the top? And which are being pushed to the side? Here’s our take on the emerging trends:
 


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