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Public Sector and Governance

How to Fix Fragile States? The OECD Reckons it’s All Down to Tax Systems.

Duncan Green's picture

‘Over-generous tax exemptions awarded to multinational enterprises often deprive fragile states of potential revenues that could be used to fund their most pressing needs.’ Another broadside from rent-a-mob? Nope, it’s the ultra respectable OECD in its Fragile States 2014 report.

After years of growth, aid to fragile states started to fall in 2011, so the report centres around an urgent call for OECD member states to help their more fragile cousins find a post-aid arrangement that funds essential state functions and builds the ‘social contract’ with citizens.

The key is a shift from aid dependence to ‘domestic resource mobilization’ (taxes and natural resource royalties), currently averaging a feeble 14% of GDP across fragile states and far too dependent on royalties from oil, gas and mineral extraction. Foreign direct investment (factories, farms etc) is generally low in volume and volatile.

Pushing the Envelope

Laura Ralston's picture

Giving Cash Unconditionally in Fragile States

2012 Spring Mtgs - Close the Gap There have been many recent press articles, a couple of potentially seminal journal papers, and some great blogs from leading economists at the World Bank on the topic of Unconditional Cash Transfers (UCTs). It remains a widely debated subject, and one with perhaps a couple of myths associated with it. For example, what is cash from UCTs used for? Do the transfers lead to permanent increases in income? Does it matter how the transfers are labelled or promoted? I am particularly interested in whether UCTs could be a useful instrument in countries with low institutional capacity, such as fragile and conflict-affected states (FCS).

Why UCTs in FCS? UCTs present a new approach to reducing poverty, stimulating growth and improving social welfare, that may be the most efficient and feasible mechanism in FCS. A recent evaluation of the World Bank’s work on FCS recognized, “where government responsiveness to citizens has been relatively weak, finding the right modality for reaching people with services is vital to avoiding further fragility and conflict”. Plus there is always the risk of desperately needed finances being “spirited away” when channeled through central governments. UCTs may present a mechanism for stimulating the provision of quality services, which are often lacking, while directly reducing poverty at the same time. As Shanta Devarajan’s blog puts it, “But when they (the poor) are given cash with which to “buy” these services, poor people can demand quality—and the provider must meet it or he won’t get paid.” We should explore more about this approach to tackling poverty: where and when it has worked, what made it work, and whether we can predict whether it will work in different contexts.
 

Thinking through unorthodox ideas for governance change in difficult contexts

Tina George Karippacheril's picture
 Accountability Lab/Morgana WingardWe are curating a new monthly series on Digital Gov. in developing countries. The series seeks fresh perspectives and insights into the policy, institutional and technical dimensions of technology and public management to understand how to make services work for businesses and citizens. In the second post of the series, we reflect on unorthodox, locally adapted solutions for institutional transformation in fragile states.

Some 1.5 billion people live in fragile states, “a group of countries at the bottom that are falling behind, and often falling apart” (The Bottom Billion, Collier, 2007). These states are marked by repeated cycles of violence, and weak institutional capacity and an inability to deliver basic services to their citizens.

Achieving Shared Prosperity in the Middle East and North Africa

Elena Ianchovichina's picture

In terms of the World Bank’s twin goals of eliminating extreme poverty and boosting shared prosperity, the Middle East and North Africa Region was making steady progress. The percentage of people living on less than $1.25 a day was 2.4% and declining.  And the incomes of the bottom 40% have been growing at higher rates than average incomes in almost all MENA countries for which we have information.

Yet, there were revolutions in several countries and widespread discontent. Why?

 

For Vietnam, Trade Competitiveness Much More than a Slogan

Luis Blancas's picture

Click to enlarge the infographic.Vietnam is one of the world's development success stories. It is undeniable. 

Between 1990 and 2010, Vietnam grew at an average annual rate of 7.4 percent—one of the world’s top five growth performance records, anywhere, over the same 20-year period. In the process, the incidence of poverty has declined dramatically, from 58 percent in 1993 to about 10 percent today. Nowadays Vietnam is no longer considered a low-income country: it has attained lower-middle income status.

Yet this successful economic transition has also generated a number of challenges. Chief among them is that of sustaining economic growth going forward.
 

Is Economic Growth Good for the Bottom 40 Percent?

Mamta Murthi's picture

Lessons from the recent history of Central Europe and the Baltics


Economic growth has returned to Central Europe and the Baltics. With the exception of Slovenia, all countries are expected to see positive growth in 2014 - ranging from a tepid 0.8% in Croatia, to more respectable growth rates of 2.2% in Romania and 2.8% in Poland, to highs of 3-4.5% percent in the Baltic Republics. Europe, more broadly, is also turning the corner and is expected to grow at around 1.5%.

Amidst this much welcome growth, however, one question remains: will economic growth be good for the bottom 40 percent and can they expect to see their incomes grow?

Weekly Wire:the Global Forum

Roxanne Bauer's picture
These are some of the views and reports relevant to our readers that caught our attention this week.
 

World Press Freedom Index 2014
Reporters Without Borders
The 2014 World Press Freedom Index spotlights the negative impact of conflicts on freedom of information and its protagonists. The ranking of some countries has also been affected by a tendency to interpret national security needs in an overly broad and abusive manner to the detriment of the right to inform and be informed. This trend constitutes a growing threat worldwide and is even endangering freedom of information in countries regarded as democracies. Finland tops the index for the fourth year running, closely followed by Netherlands and Norway, like last year. At the other end of the index, the last three positions are again held by Turkmenistan, North Korea and Eritrea, three countries where freedom of information is non-existent. READ MORE

Throwing the transparency baby out with the development bathwater
Global Integrity
In recent weeks, a number of leading voices within the international development movement – including the billionaire philanthropist Bill Gates as well as development economist Chris Blattman and tech-for-development expert Charles Kenny - have come out arguing that corruption and governance efforts in developing countries should be de-prioritized relative to other challenges in health, education, or infrastructure. Their basic argument is that while yes, corruption is ugly, it’s simply another tax in an economic sense and while annoying and inefficient, can be tolerated while we work to improve service delivery to the poor. The reality is more complicated and the policy implications precisely the opposite: corruption’s “long tail” in fact undermines the very same development objectives that Gates, Blattman, and Kenny are advocating for. READ MORE

Improving Service Delivery in Pakistan, One Text Message at a Time

Mabruk Kabir's picture

After visiting a government office, residents in Punjab may be surprised to find a familiar voice on the phone – their Chief Minister. “You have recently registered property,” the voice of Shahbaz Sharif booms, “Did you face any difficulties? Did you have to pay a bribe?” (Hear the robo-call here!)
 
It is an uncomfortable question – but one that tackles a stubborn social issue in Pakistan. In a country of 180 million, a culture of bribery and pretty corruption plagues public service delivery.
 
When visiting a land services official, a staggering 75 percent of households reported paying a bribe, according to Transparency International. Over half of households said they bribed the public utilities or a police officer in the last year. Endemic corruption is not just a drag on economic activity and poverty reduction efforts – it erodes trust between citizens and the state. 

TPP & TTIP: More Questions Than Answers

Miles McKenna's picture

Incense stick production in Hue, Vietnam. The country could be one of the biggest winners of a potential Trans-Pacific Partnership trade agreement. Source - Austronesian Expeditions.If you follow trade negotiations, then you know there are few more contentious than those for the Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP).
 
On February 4, the World Bank’s International Trade Unit hosted Phil Levy, a senior fellow on the global economy at the Chicago Council on Global Affairs, who has been following both negotiations closely. Levy spoke with World Bank staff about the potential implications for developing countries as negotiations move forward in what he calls “bargaining among behemoths.”
 
At this point in the negotiations, one thing is clear: there are still more questions than answers.

What are the Sources of Corruption?

Augusto Lopez-Claros's picture

In a previous blog we discussed the factors that have pushed issues of corruption to the centre of policy debates about sound economic management. A related question deals with the sources of corruption: where does it come from, what are the factors that have nourished it and turned it into such a powerful impediment to sustainable economic development? Economists seem to agree that an important source of corruption stems from the distributional attributes of the state. For better or for worse, the role of the state in the economy has expanded in a major way over the past century. In 1913 the 13 largest economies in the world, accounting for the bulk of global economic output, had an average expenditure ratio in relation to GDP of around 12%. This ratio had risen to 43% by 1990, with many countries’ ratios well in excess of 50%.  This rise was associated with the proliferation of benefits under state control and also in the various ways in which the state imposes costs on society. While a larger state need not necessarily be associated with higher levels of corruption—the Nordic countries illustrate this—it is the case that the larger the number of interactions between officials and private citizens, the larger the number of opportunities in which the latter may wish to illegally pay for benefits to which they are not entitled, or avoid responsibilities or costs for which they bear an obligation.


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