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Private Sector Development

The Missing Conversation: How to Build a Moral Capitalism in the Arab Region

Ishac Diwan's picture
Also available in: العربية

A young Egyptian holding a flag The Arab transition countries, Tunisia, Egypt, Yemen, and Libya, are grappling with complex issues relating to personal values, the extent of freedom of speech, individual rights,  family matters, that all orbit around deep issues of identity and the respective roles of the individual, the state and society. These social conversations are constructive in that they reflect a rich pluralism of views in societies where conformity was the rule under dictatorship. But unfortunately, these dialogues are polarizing society, leading to violence and threatening chaos and a possible return to authoritarianism. In fact, the current social polarization to a large extent reflects attempts by political entrepreneurs to use existing social fault lines, and even exacerbate them, in ways that mobilize passions among possible supporters, driven to over-reach by the political vacuum created by the departure of the historical autocrats. The dynamics in Morocco, Jordan, Algeria, and Lebanon are slightly different, but here too, the intense and exclusive focus on identity is crowding out more important and immediate social and economic challenges.

The Economist and Lancet Views on Bangladesh: What’s Missing?

Hassan Zaman's picture

Women in rural villageAbout a year back the Economist had an editorial piece titled "Out of the basket" and subtitled “Lessons from the achievements – yes, really, achievements – of Bangladesh.” The more in-depth piece that followed appeared somewhat bemused at how a country once labeled a ‘test case for development’ could have made such striking gains in development outcomes over the past two decades (see table 1). These gains were hard to reconcile amidst Bangladesh’s natural and Rana Plaza-type disasters, volatile politics and unfavorable rankings on governance indicators – themes which the Economist has often covered before, and after, this “achievements” piece.

This past week the Lancet has come out with a special issue on Bangladesh which the journal editors say is in order to “investigate one of the great mysteries of global health.” Specifically the published papers are meant to explore how “Bangladesh has made enormous health advances and now has the longest life expectancy, lowest fertility rate and lowest infant and under-5 mortality rates in South Asia despite spending less on health care than several neighbouring countries.” Both these publications help explain the various ‘Bangladesh paradoxes’ but they also overlook, or underplay, a few critical factors.

中国的三中全会:会带来诸多改变——对其他发展中经济体而言亦是如此

Manu Bhaskaran's picture
Also available in: English

CN142S09 World Bank 一些观察人士提醒人们三中全会后中国共产党提出的各项改革可能因为既得利益方的阻力或缺乏政治意愿而落空。而我认为这会给中国带来根本性变化,只因为一个简单的理由——政治。首先,中共领导层完全明白该党已经因为越来越严重的腐败问题和裙带之风、越来越招人怨恨的收入不均、对食品安全的巨大怀疑以及日益恶化的污染而丧失了人民的信任。第二,他们认识到现有的经济模式不能持续地提供足以换取民众对党的拥护的经济进步。中国共产党的领导者们知道需要对当下的经济模式作出根本性改变才能重新赢得人民的信任。正因为要生存下去就要进行重大变革,因此,中共领导层将全力以赴。
 
但是有没有进行改革的政治能力呢?且来看看习近平主席是如何亲自掌控监督经济改革的机制的。习近平将领导负责“全面深化改革”的小组,这个小组将具体实施规划的各项改革。此外,他还设立了一个将由他领导的“国家安全委员会”。原中国领导人江泽民曾试图设立这样一个国家安全委员会,但未能成功。显然,习近平的同事们准备给予他推进改革所需的政治权威,而即便是江泽民这样有影响力的人也缺乏这种权威。有了他个人的权威作为这些改革的后盾,习近平不太可能妥协或退让。
 
最开始变革将分阶段谨慎地展开,但累积起来后会在2020年前改变中国的经济格局。在经济领域内,市场力量将被赋予更大的影响力,国有企业将被迫按照更商业化的方式运作,私营部门将被给予更大的活动空间。农村土地市场将建立起来,同时对农村移民在城市地区生活的限制也将分阶段取消。中央、省和地方政府之间的关系将有所改变,后两级权力部门将能更公平地分享到税收收入,从而与它们承担的责任更一致。金融改革将消除诸如对储户的不公平待遇等诸多扭曲问题。如果一切都能按计划进行,中国将变成一个更高效的经济体,拥有比现在更具活力的私营部门,出现从能在环境和收入分配方面产生更好结果这个意义上来说质量更高的增长。
 
其他发展中国家应该留心中国发生的变化。如果中国能咬紧牙关,作出维持经济发展所需要的痛苦改变,其他大的发展中经济体——比如印度和印度尼西亚——为什么就不能同样做到呢?
 

China’s Third Plenum: Much will Change - for Other Developing Economies Too

Manu Bhaskaran's picture
Also available in: 中文

CN142S09 World Bank Some observers caution that the reforms proposed by the Chinese Communist Party (CCP) after the Third Plenary meeting of its Central Committee may fall short of promise because of resistance from vested interests or a lack of political will. My view is that it will bring about fundamental changes in China for one simple reason - politics. First, the CCP leadership fully understands that the party has lost the trust of the people because of rising corruption and cronyism, increasingly offensive income inequality, huge question marks over food safety, and worsening pollution. Second, they realize that the current economic model cannot sustainably deliver the economic progress that citizens expect in return for their allegiance to the CCP. The CCP leaders know that fundamental changes are needed to this economic model to regain the trust of the people. Since survival demands big changes, the leadership will pull out all the stops.

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).

Inclusive Growth in Turkey – Can it Be?

Martin Raiser's picture
Also available in: Türkçe


Turkey-21406200003 World BankThe issue of social inclusion in Turkey is a controversial one. In this blog, I want to present some data that suggest Turkey experienced inclusive growth over the past decade or so. My colleagues and I have shared this basic story with a number of audiences in Turkey and often the reaction is disbelief. So what does the data say?

The bottom 40 percent can look up

I use three pieces of evidence to make my case.  The first is based on recent work by Joao Pedro  Azevedo and Aziz Atamanov of the World Bank on shared prosperity. Joao Pedro and Aziz’s work is ongoing and much richer than what I want to present here. So let me just focus on the following chart, which shows the growth of consumption of the bottom 40 percent in Turkey between 2006-2011 and in a number of other countries during roughly the same period. Turkey looks reasonably good albeit not exceptional. The rate of consumption growth of the bottom 40 percent was just over 5 percent, around 0.2 points below the rate of growth for the average. What this means is that during this period of significant global economic turbulence the average welfare of the bottom 40 percent improved by more than one quarter. This was better than India, Indonesia, or Mexico, albeit worse than Brazil, China and Russia.

FIAT-Serbia: Industrial Policy Trailblazers?

Wolfgang Fengler's picture
Also available in: Српски
 

In the 1970s and early 1980s my family’s yearly vacation trip from Southern Germany to Greece involved a grueling 36 hour trek through the infamous “Auto-put”: Maribor-Ljubljana-Zagreb-Belgrade-Nis-Skopje-Evzoni. The trip was hazardous, always an adventure. To fill our car in “socialist Yugoslavia”, we had to buy gasoline vouchers upfront at the border.

We drove a Fiat 132 which served us well during these long road trips. These memories came back to me when a World Bank team recently visited the brand new FIAT car factory in Kragujevac, two hours South of Belgrade. This is a high stakes investment for FIAT and a strong signal for Serbia’s dormant manufacturing. The factory is producing the new 500L (in several different variants), a modernized version of its legendary Cinquecento. Early this October, the company and the factory celebrated the first anniversary of the 500L’s regular production. During that year, some 100,000 units were produced, overwhelmingly for export around the world, including to the USA. As a result FIAT is now Serbia’s largest exporter (over a billion euros’ worth -15% of total exports of goods from Serbia- in the first three quarters of 2013 ). Just two years before, exports of vehicles amounted to 2% of total exports (see figure).  Today, Kragujevac is producing 600 cars daily and has created more than 3,000 jobs with the potential for more. Importantly, a network of suppliers is springing up, both in Kragujevac, as well as in other towns in Serbia.

The Beauty of Numbers

Wolfgang Fengler's picture

One of my first assignments in the World Bank, some 13 years ago, was in a small and complicated country, better known for coups and mercenaries than for statistical capacity. Before I set off to the Comoro Islands, my then manager (now an established World Bank Vice-president) gave me the following priceless advice: “When you get there, make sure to get a lot of data. It may be difficult to get and sometimes even flawed, but data has one great advantage: It cuts through a lot of crap.”  

Accounting chartsNumbers are indeed beautiful. They can help bring clarity to our lives and save us time as well as resources. But raw data can be messy and you also need a good system for deciding which numbers to use and how to interpret them. Last week’s launch of the 2014 Doing Business rankings reminded me of the advice my then boss had given me. Doing Business started from the premise that companies are the backbone of any economy but that investors often lacked knowledge of the conditions in “frontier economies”. With the benefit of an annual assessment of the business environment in each country, investors could make more informed decisions. As for policy makers, they could more easily attract investors, provided they made a genuine effort in cutting red tape and supporting businesses.

Is Trust a Crucial Factor in Business Success? (Part II)

Jacques Morisset's picture
Also available in: Français

Running a small business in a developing country is tough. Many entrepreneurs have little education to operate their business efficiently. They have also to do it in a difficult environment; full of predators –such as customers that do not want to pay their purchase, employees that leave with equipment and creditors that charge exorbitant interest rates. Many of those problems are rooted in the lack of trust (see part 1). Unfortunately, in most developing countries, traditional channels of regulation and trust between people and businesses have not yet been replaced by alternative mechanisms. This has to change.

A great many odds
Maasai women make, sell and display their bead work In the industrialized world, small firm owners are generally more educated and wealthier than the average citizen. In the US, they are about three times richer. Entrepreneurship is by choice, especially for those who have the initial assets, and this self-selective mechanism ensures that small firms do expand as their owners are also the people most capable to make them succeed.
 
By contrast, in developing countries entrepreneurship is not a choice for the vast majority. It is often their only option for economic survival. For this reason, the rate of entrepreneurship is four times higher in Uganda and Tanzania than in the US or 10 times higher than in France. (Tanzania National Panel Survey 2010/11) However, these entrepreneurs have little education and suffer severe cash constraints and limited access to credit. These factors explain why so much attention is devoted to improving entrepreneurs’ assets and capacities, mostly through skills development and better access to credit. The most successful programs appear to be those that have targeted young entrepreneurs by combining both training and financing programs.
 

Is Trust a Crucial Factor in Business Success?

Jacques Morisset's picture
Also available in: Français

Victoria has been running a small business that deals in computers and medical equipment in Dar es Salaam for about five years now. While she is making a bit of money, the business has in fact not grown to a point where she can afford an extra hand.
 
Compared to trends in industrial and emerging economies, small businesses like Victoria’s operating in developing countries have generally failed to become the main vectors of growth, job creation, and innovation. This failure is generally attributed to insufficient skills and financial resources in the hands of local entrepreneurs in addition to unreasonable administrative and transport costs.
 
Valid as these arguments might be, they also miss a crucial factor which might be instrumental in the apparent flourishing of such firms elsewhere – trust, or the lack thereof, of small firms in their operating environment.
 
Maasai women make, sell and display their bead work Distrust – or lack of trust – works against the success of small businesses in many ways. It is depicted in the standard payment policy of 100 percent upfront in order to guard against the risk of not being paid after the merchandise is delivered. Such a policy is detrimental as small firms lose clients who do not always have the resources at hand given their restricted cash flow. Indeed, in the US where less than 20 percent of transactions are on a cash basis, a firm would risk losing many of its customers if it was to adopt such a policy today

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