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The World Region

Time to Boost IBRD as well as IDA

Homi Kharas's picture

2013 World Bank / IMF Annual Meetings When the negotiations for IDA17 were wrapped up in December, there was great relief that IDA deputies were supportive of an IDA expansion despite their own significant budget difficulties. As part of that package, the World Bank Group itself pledged to give IDA $3 billion from profits.

This was a generous gesture by the World Bank (albeit a drop in the bucket of total aid), but how good was it for the global development effort? Consider the following—net disbursements of official grants and concessional loans (the category where IDA flows appear) have expanded from $39 billion per year in the 1980s (in constant 2005 dollars) to $85 billion in 2010 and 2011. In contrast, official non-concessional lending (the category where IBRD and IFC flows appear) has stayed steady. The latter was $15 billion in the 1980s and $22 billion in 2010/11. This picture is even more striking when considering the amounts in terms of recipient GDP. Grants and concessional flows to low income countries have gone from 3% of their GDP in the 1980s to 13% today, while non-concessional flows to lower middle-income countries (excluding India and China) have gone from 0.7% to 0.3% of their GDP. In fact, from 2000 to 2009, non-concessional flows to lower middle- income countries (and to developing countries as a whole) were negative, implying that developing countries repaid more to official development agencies than they received in gross disbursements.

How to Make Difficult Decisions … a bit Easier to Take

Wolfgang Fengler's picture

There is a fine line between legitimate caution and needless un-decisiveness. At work it’s easy and tempting to get frustrated when you feel that colleagues (or worse your boss) simply can’t make up their mind. You feel your work is being delayed for no good reason and there can come a point when a clear-cut “no go” seems better than more waiting and uncertainty.

In his best-selling book, “7 habits of highly successful people”, Stephen Covey identifies the ability to make decisions on time as a key driver of success. Poor performing and unaccountable leaders enjoy living in ambiguity. They don’t disclose the parameters of their decisions either. By contrast, strong performers are those who recognize that there is no such thing as a perfect decision (otherwise there would be nothing to decide about). Michael Joseph, the former CEO of Kenya’s Telecom giant Safaricom, clearly belongs to the latter group. He is a decider. When asked about the secrets of Safaricom’s spectacular success at a meeting with World Bank staff in Nairobi he explained: “You need to make decisions. Even if you only get 7 out of 10 right, you are fine.”

Why is Corruption Today Less of a Taboo than a Quarter Century Ago?

Augusto Lopez-Claros's picture
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For those of us who have had an interest in corruption for much of our careers, there is little doubt that sometime in the late 1980s and early 1990s there was a shift in thinking within the development community about the role of corruption in the development process. The shift was tentative at first; continued reluctance to touch upon a subject that was seen to have a large political dimension coexisted for a while with increasing references to the importance of “good governance” in encouraging successful development. What were the factors that contributed to this shift? One that quickly comes to mind is linked to the falling of the Berlin Wall and the associated collapse of central planning as a supposedly viable alternative to the free market. It was obvious that it was not inappropriate monetary policies that led to the collapse of central planning but rather widespread institutional failings, including a lethal mix of authoritarianism (i.e., lack of accountability) and corruption.

To Maximize the Gains from Trade - Focus on Firms and Cities

Megha Mukim's picture

Trade and growth go hand-in-hand. When the 2008 global financial crisis hit, both collapsed.

Since then both have steadied somewhat. But recovery has been jobless in many countries. The biggest challenge that developing countries will face: sustaining economic growth, while maintaining their focus on reducing poverty and inequality. Trade can be an important weapon in the policy-maker’s arsenal to help tackle these dual objectives.

Broadly, economists agree that declining levels of poverty have been accompanied by sustained periods of rapid growth and openness in all countries. In India, there has been a wealth of econometric work that demonstrates the links through which openness to trade has contributed directly to poverty alleviation – via growth and employment. More recently, Arvind Panagariya and I measured the impact of trade on poverty across different social groups – castes and religions – in India. We found that trade openness lifts all boats, for schedules castes and tribes, and for marginalized communities. Interestingly, the impact was especially strong in urban regions.   Other research finds that states whose workers are on average more exposed to foreign competition tend to have lower rural, urban and overall poverty rates.

Future Development Forecasts 2014

Shanta Devarajan's picture

We asked our bloggers and guest bloggers for their predictions for 2014. Here is a summary of seven main themes, which we will re-visit in late 2014 to see how well we did.

1. Global growth will remain robust and tapering by the U.S. Fed will be less consequential to emerging markets than expected (Bhaskaran, Zaman, Raiser).  China will do better than markets predict (Huang), and East Asia will continue to grow with relative stability (Quah). At the same time, the economic policies of some Latin American countries will bring their economies to a breaking point, causing political chaos as well (Gonzalez).  Political turmoil and conflict in the Middle East and North Africa will continue to weigh heavily on these economies, with average growth for the region below 3 percent (Devarajan). 

2. For Europe, 2014 will be a better year. 100 years after the beginning of the First World War, the Balkans will again be the focus of attention but for better reasons. A more pro-European outlook in Germany and a successful launch of negotiations with Serbia will bode well for the EU. Bosnia and Herzegovina, the scene of the assassination of heir apparent Franz Ferdinand which triggered the beginning first world war, will do surprisingly well at the World Cup in Brazil, for which it qualified for the first time ever. The joy, however, will only be short-lived because political infighting will continue to make it one of the least governable states in Europe (Fengler).

Food for Thought

Homi Kharas's picture

Close the Gap - School Feeding Programs As we enter the holiday season, it is worth reflecting on one of the most pernicious slow-moving crises of our time: the continued presence of hunger in a world of plenty. Ending hunger by 2030 and protecting the right of everyone to have access to sufficient, safe, affordable and nutritious food is one of the targets proposed for the post-2015 agenda by the High-Level Panel on the Post-2015 Development Agenda, and many others are also promoting the same message. Pope Francis is the latest entrant into this debate with his announcement of a global campaign of prayer and action to end to hunger and malnutrition, “One Human Family, Food For All”. The campaign includes encouragement for local, national or global level action against food waste and the promotion of food access and security worldwide. The Pope prompts us all to ask ourselves, what will it take to end hunger?

Migration as Structural Transformation

Shanta Devarajan's picture
IN024S05 World Bank When a poor person moves from a low-productivity job to a higher-productivity one, we usually celebrate.  The worker is clearly better off; the hiring firm is no worse off; and it’s good for the economy as a whole.  Indeed, development is often described as the process of structural transformation, where low-productivity workers (typically in agriculture) move to higher-productivity jobs in manufacturing or services. 

But when that same worker happens to cross a national border, we call it “migration” and, instead of celebrating, we start investigating the effects on workers, firms and public finances in the new environment; and on those left behind (the so-called “brain drain”).  Instead of promoting structural transformation, we look for policies to manage it.

Convergence in the Ease of Doing Business

Augusto Lopez-Claros's picture

Overlooking the central Kumasi marketSuppose that one were to divide the countries included in the latest Doing Business report into two groups. Call the first group (made up of some 44 countries) the “worst quartile”—that is, the countries with the costliest and most complex procedures and the weakest institutions. Call the other group the “best three quartiles.” Then let’s ask ourselves: how many days did it take to establish a business in both groups in 2005? The answer is 113 days in the worst quartile and 29 days in the best three quartile countries, meaning that in 2005 there was a gap of 84 days between the two sets. Now, let’s repeat the exercise for 2013. The worst quartile is down to 49 days and the best three quartiles is down to 16; the gap between the two has narrowed to 33 days, which is still sizable but a lot less than 84. Repeat the same exercise for time to register property and time to export a container. For property registration, the gap in 2005 was 192 days and by 2013 it has narrowed to 63. For time to export, the gap in 2005 was 32 days and in 2013 it was down to 23. (The figures are presented in the charts below. Only a small subset of the indicators has been included here, for illustrative purposes).

Twin Goals

Gabriel Demombynes's picture

Bending the Arc of Poverty Featuring World Bank Group President Jim Yong Kim and Chief Economist Kaushik Basu The World Bank has committed itself to twin goals: eliminating extreme poverty by 2030 and boosting shared prosperity, measured as the income of the bottom 40 percent in any given country. This recently inspired a post by Nancy Birdsall arguing that median income would be a better measure of shared prosperity, and another post by Lant Pritchett arguing that the extreme poverty goal is too narrow, which sparked comments by Martin Ravallion and others.

My view on those intriguing issues is that the train has already left the station. The question of what the goals are has been settled, and the question we are now pondering within the World Bank is what it means to “operationalize the goals.” We understand that projects should be prioritized in terms of how much they contribute to these goals. But how?

Is the New York Times Ethicist a Better Economist than…..The Economist?

Jishnu Das's picture

The Sunday before last I woke up to a couple of articles in the New York Times Magazine and The Economist. In the first article, the New York Times ethicist was asked a question about Halloween candy: Are dentists who purchase candy from kids (thus protecting their teeth) and donate it to poor families engaging in “thoughtless, unethical and unprofessional” behavior?  The Economist article summarized research on cash transfers to the poor, concluding that “Giving money to poor people works surprisingly well. But it cannot deal with the deeper causes of poverty”. In both articles, the fundamental question is how we measure and judge improvements in welfare based on what people consume. But while the ethicist takes the question head on, The Economist does not even get the question right.

A dentist examines a young child's teeth To see this, recall that in welfare economics there are two rationales for government interventions to make people better off. First, governments fix market failures. If the market does not produce efficient outcomes, the government can use taxes and subsidies to make things better. Externalities are classic examples. I don’t worry that my pollution makes others worse off and therefore “over pollute”. But the government can tax that pollution to the point where I behave “as if” I care about others.

Second, governments redistribute income by giving cash to the poor. If, in society’s judgment, an alternate distribution of consumption is better, government could achieve that distribution by redistributing “endowments” or cash from one party to another.

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