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Private Sector Development

How can Indonesia achieve a more sustainable transport system?

Tomás Herrero Diez's picture
Photo: UN Women/Flickr
Indonesia, a vast archipelago of more than 17,500 islands, is the fourth most populous country in the world, with 261 million inhabitants, and the largest economy in Southeast Asia, with a nominal Gross Domestic Product of $933 billion.

Central government spending on transport increased by threefold between 2010-2016. This has enabled the country to extend its transport network capacity and improve access to some of the most remote areas across the archipelago.

The country has a road network of about 538,000 km, of which about 47,000 km are national roads, and 1,000 km are expressways. Heavy congestion and low traffic speeds translate into excessively long journey times. In fact, traveling a mere 100 km can take 2.5 to 4 hours. The country relies heavily on waterborne transport and has about 1,500 ports, with most facilities approaching their capacity limits, especially in Eastern Indonesia. Connectivity between ports and land infrastructure is limited or non-existent. The rail network is limited (6,500 km across the islands of Java and Sumatra) and poorly maintained. The country’s 39 international and 191 domestic airports mainly provide passenger services, and many are also reaching their capacity limits.

Exposure of Belt & Road Economies to China Trade Shocks

Paulo Bastos's picture
The Belt and Road (B&R) Initiative seeks to deepen regional integration by improving infrastructure and strengthening trade and investment linkages along the old Silk Road, from China to Europe. With several infrastructure projects already ongoing, the initiative is expected to progressively reduce trade costs over the coming decades, and hence generate long-run economic gains for B&R economies.
 
Photo: Rob Beechey / World Bank

Has Bhutan’s growth been jobless?

Tenzin Lhaden's picture
Bhutan's youth unemployment rate has increased from 10.7 percent in 2015 to 13.2 percent in 2016
Bhutan continues to maintain solid growth and macroeconomic stability but job creation is lagging; its  youth unemployment rate has increased from 10.7 percent in 2015 to 13.2 percent in 2016. This indicates that high growth has not been able to generate enough jobs for youth. 

“The main driver of growth in Bhutan continues to be the hydropower sector, but electricity generation does not create job,” said a senior government officials attending the presentation of The World Bank’s South Asia Focus on Jobless Growth on June 28th in Thimphu. The report was presented by Martin Rama, World Bank South Asia Region Chief Economist and was attended by senior government officials, parliamentarians and development partners. The presentation alongside the launch of Bhutan Development Update was a great opportunity for the policy makers to better understand and synthesize Bhutan and the South Asia region’s development opportunities.

In the case of Bhutan, it seems clear that growth alone will not allow it to attain higher employment rates as enjoyed by some other developing countries.

"More than 1.8 million young people will reach working age every month in South Asia through 2025 and the good news is that economic growth is creating jobs in the region,” said Martin Rama,. “But providing opportunities to these young entrants while attracting more women into the labor market will require generating even more jobs for every point of economic growth.”

The report informs that the fall in employment rates has been much faster in the region particularly in India, Bhutan and Sri Lanka and especially for women, risking foregoing the demographic dividend. While it is evident that the number of working age people is increasing, the proporation who are at work has declined owing to prioritization of the households to education, health and other commitments with increasing level of income.

InsureTech for Development

Peter Wrede's picture

Ventures that promise to make insurance more fun with technology attract considerable attention and funding. In mature markets, that is. More than half of the $2.3 billion InsureTech funding in 2017 went to the US and the UK, where the average person spends more than $5,000 on insurance every year (that includes newborns). In a country like Bangladesh, by comparison, insurance premium per capita is $8, and this statistic fails to show that most people have no insurance at all, so that insurable events such as accidents end the progress out of poverty for too many. The obstacles that prevent these people from including insurance in their risk management toolkit are surprisingly similar to the obstacles that InsureTech wants to remove to better serve American Millennials. They include lack of trust in insurance companies and lack of understanding of insurance, but also the frustration caused by annoying processes (think filling long forms and waiting for mailed responses) and products that don’t fit. 

But there’s an app for that.

How to boost female employment in South Asia

Martin Rama's picture
What's driving female employment in South Asia to decrease


South Asia is booming. In 2018, GDP growth for the region as a whole is expected to accelerate to 6.9 percent, making it the fastest growing region in the world. However, fast GDP growth has not translated into fast employment growth. In fact, employment rates have declined across the region, with women accounting for most of this decline.

Between 2005 and 2015, female employment rates declined by 5 percent per year in India, 3 percent per year in Bhutan, and 1 percent per year in Sri Lanka. While it is not surprising for female employment rates to decline with economic growth and then increase, in what is commonly known as the U-shaped female labor force function (a term coined by Claudia Goldin in 1995), the trends observed in South Asia stand out. Not only has female employment declined much more than could have been anticipated, it is likely to decline further as countries such as India continue to grow and urbanize.

The unusual trend for female employment rates in South Asia is clear from Figure 1. While male employment rates in South Asia are in line with those of other countries at the same income level, female employment rates are well below.
From the South Asia Economic Focus
Source: South Asia Economic Focus (Spring 2018).

If women are choosing to exit the labor force as family incomes rise, should policymakers worry? There are at least three reasons why the drop in female employment rates may have important social costs. First, household choices may not necessarily match women’s preferences. Those preferences reflect the influence of ideas and norms about what is women’s work and men’s work as well as other gendered notions such as the idea that women should take care of the children and housework. Second, when women control a greater share of household incomes, children are healthier and do better in school. Third, when women work for pay, they have a greater voice in their households, in their communities, and in society. The economic gains from women participating equally in the labor market are sizable: A recent study estimated that the overall gain in GDP to South Asia from closing gender gaps in employment and entrepreneurship would be close to 25 percent.

How data can benefit Nepal

Ravi Kumar's picture
School children in Nepal. Graphic: Nicholas Nam/World Bank

Thirty years ago, almost everyone in Nepal — except for a few professionals and business people — would have been classified as poor by any international standard.

In 2010, by contrast, 15 percent of Nepalis were considered poor.

Without a doubt, Nepal has made progress.

Unlocking Competitiveness: Why Invest in Rural Vietnam?

Christine Qiang's picture
For investors seeking opportunities in Vietnam, the rural province of Dong Thap may not be the first location that comes to mind. Located in the southwest corner of Vietnam, Dong Thap is remote – the nearest airport is a three-hour drive. Road infrastructure is relatively poor, and until recently was complicated by deficient bridges over the Mekong River. It was also known for delayed customs processes that could disrupt supply chains.
 

Face to face with William Maloney, Chief Economist, Equitable Finance and Institutions

Nandita Roy's picture

Returns on technological adoption are thought to be extremely high, yet developing countries appear to invest little, implying that this critical channel of productivity growth is underexploited. A recent World Bank study – The Innovation Paradox: Developing-Country Capabilities and the Unrealized Promise of Technological Catch-Up – sheds light on how to address this paradox. In this interview, William Maloney Chief Economist, Equitable Finance and Institutions Practice Group, World Bank Group, calls upon developing country public and private-sector leaders to pursue a more focused approach to innovation policy.



What is the new study Innovation Paradox all about?

The potential gains from bringing existing technologies to developing countries are vast, much higher for poor countries than for rich countries. Yet developing-country firms and governments invest relatively little to realize this potential. That’s the origin of what we are calling ‘The Innovation Paradox’.

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Why do firms in developing countries lag behind when it comes to innovation?

The Innovation Paradox, argues that developing country firms choose not to invest heavily in adopting technology, even if they are keen to do so, because they face a range of constraints that prevent them from benefitting from the transfer.

Developing country firms are often constrained by low managerial capability, find it difficult to import the necessary technology, to contract or hire trained workers and engineers, or draw on the new organizational techniques needed to maximize the potential of innovation. Moreover, they are often inhibited by a weak business climate. For example, small and medium enterprises (SMEs) are constantly in a situation where they are putting out fires, they don’t have a five-year plan, they don’t have somebody keeping track of what new technology has come out of some place that they could bring to the firm.

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How can developing economies catch up with the developed world on innovation?

The rates of return to investments and innovation of various kinds appear to be extremely high, yet we see a much smaller effort in these areas.  In the developing countries, we need to think not only about barriers to accumulating knowledge capital, we have to think about all the barriers to accumulating all of the complementary factors—the physical capital. So, if I have a lousy education system, it doesn’t matter if I get a high-tech firm because there won’t be any workers to staff it.

Innovation requires competitive and undistorted economies, adequate levels of human capital, functioning capital markets, a dynamic and capable business sector, reliable regulation and property rights. Richer countries tend to have more of these conditions. This is at the root of Paradox. Even though follower countries have much to gain from adopting existing technologies from the advanced countries, in practice, missing and distorted markets, weak management capabilities and human capital prevent them from taking advantage of these opportunities.

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How data can benefit Nepal

Ravi Kumar's picture

Thirty years ago, almost everyone in Nepal —except for a few professionals and business people—would have been classified as poor by any reasonable international standard.

In 2010, by contrast, 15 percent of Nepalis were considered poor.

Without a doubt, Nepal has made progress.

Now the 761 newly formed—local, provincial, and federal—governments in Nepal aim to provide all Nepalis access to essential public services, eliminate poverty, reduce gender and ethnic inequalities, and ensure environmental sustainability

The hope is that Nepal will reach middle-income status by 2030.

But tracking and monitoring progress against the goals articulated in Nepal’s development vision as well as the global Sustainable Development Goals (SDGs) impose significant demands on the country.

Unfortunately, the absence of disaggregated data by geography, sex, age, social groups and sub-national level, and more poses an enormous challenge for all levels of governments to properly plan and budget.

As such, Nepal needs to urgently invest in its data and statistics capacity.

Data is the currency for decision making and helps us understand what works and what doesn’t.

For instance, let’s consider a province in Nepal that is keen to improve learning for its public schools’ students.

Without data on students, their gender, age, academic performance, or the number of schools and teachers, the provincial government cannot elaborate an informed plan for its students.

But were policymakers able to access timely and sufficient data, they could decide whether more teachers or more schools are needed. Without data, decisions are just like shooting in the dark and hoping for the best.   

Mogadishu’s first tech hub

Roku Fukui's picture
Photo: UNSOM/Flickr
Somalia’s capital city of Mogadishu is defined by a complex mix of challenges and opportunities. Despite political and economic struggles, Somalis are innovating to break the chronic cycle of vulnerability. Supported in many cases by the international Somali diaspora, people in Mogadishu are using technology to solve problems and tap into new markets.

One initiative poised to accelerate this is the iRise Tech Hub, Mogadishu’s first innovation hub, co-founded by Awil Osman. iRise connects entrepreneurs, innovators, and startups to share ideas and collaborate on a variety of issues ranging from developing an online food delivery startup, to creating an open space for Somalis to incubate ideas. The Somali concept of Ilawadaag—roughly translated as ‘share with me’—is put into practice at iRise to help entrepreneurs get feedback and network with other innovators.

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