Editor’s note: This is the second installment of a two-part series. You can read part-one here. The findings, interpretations and conclusions expressed herein are those of the authors and do not necessarily reflect the view of the World Bank Group, its Board of Directors or the governments they represent.
Law and Regulation
Editor’s note: This is the first installment of a two-part series. You can read part-two here. The findings, interpretations, and conclusions expressed herein are those of the authors and do not necessarily reflect the view of the World Bank Group, its Board of Directors or the governments they represent.
The World Development Report 2017 on Governance and the Law has cast some much welcome attention on the role of law in development. Compared to other sectors, international aid to the justice sector has been relatively low: only 1.8% of total aid flows, compared with 7.4% and 7.5% for the health and education sectors respectively between 2005 and 2013. More than that, the WDR 2017 is commendable for successfully articulating a positive and coherent if cautious view of law’s role.
Delivering pension or disability services may sound mundane, but if you have seen the recent award-winning movie, I, Daniel Blake, it is anything but. As the film poignantly demonstrates, treating citizens with respect and approaching them as humans rather than case numbers is not just good practice -- it can mean life or death. In the film, Mr. Blake, an elderly tradesman with a heart condition, attempts to apply for a disability pension. In the process, he navigates a Kafkaesque maze of dozens of office visits, automated phone calls, and dysfunctional online forms. All of this is confusing and often dehumanizing.
ANNOUNCEMENT OF THE GLOBAL RIA AWARD 2017
Any visitor to Armenia can testify that the country has delicious food. But diners need to be assured that the khorovats, dolma, or basturma on their plates will not make them sick. How can this be assured?
Some 65 percent of the 320,000 inhabitants of the Brazilian city of Rio Branco use bicycles as their primary mode of transportation, and the popularity of biking is increasing across the country. But Brazil’s 40,000 annual traffic related fatalities makes protective gear a necessity. What is appropriate protection?
Economists tend to agree on the importance of competition for a sound market economy. So what’s the problem when it comes to governments competing to attract investors through the tax treatment they provide? The trouble is that by competing with one another and eroding each other’s revenues, countries end up having to rely on other—typically more distortive—sources of financing or reduce much-needed public spending, or both.
All this has serious implications for developing countries because they are especially reliant on the corporate income tax for revenues. The risk that tax competition will pressure them into tax policies that endanger this key revenue source is therefore particularly worrisome.
India is the fastest-growing major economy in the world with significant Government investments in infrastructure. According to estimates by WTO and OECD, as quoted in a report from the United Nations Office on Drugs and Crime, India: Probity in Public Procurement, the estimated public procurement in India is between 20 and 30 percent of GDP.
This translates to Indian government agencies issuing contracts worth an estimated US$ 419 billion to US$ 628 billion each year for various aspects of infrastructure projects. Ideally, in contractual agreements no disputes would arise and both sides would benefit from the outcome. However, unexpected events occur and many contracts end in dispute. Contractual legal disputes devoid project benefits to the public as time and resources are spent in expensive arbitration and litigation. As a result, India’s development goals are impacted.
Performance budgeting (PB) has a deep and enduring appeal. What government would not want to allocate resources in a way that fosters efficiency, effectiveness, transparency, and accountability? However, such aspirations have proven poor predictors of how performance data are actually used.
The potential benefits of identifying and tracking the goals of public spending are undeniable, but have often justified a default adoption of overly complex systems of questionable use. Faith in PB is sustained by a willingness to forget past negative experiences and assume that this time it will be different. Without a significant re-evaluation, PB’s history of disappointment seems likely also to be its future.
Countries with large nonrenewable resources can benefit significantly from them, but reliance on revenues from these sources poses major challenges for policy makers. If you are a senior ministry of finance official in a resource-rich country, what are the challenges that you would face and Consider some of the issues that you would likely encounter:
For many resource abundant countries, large and unpredictable fluctuations in fiscal revenues are a fact of life. Resource revenues are highly volatile and subject to uncertainty. Fiscal policies will need to be framed to support macroeconomic stability and sustainable growth, while sensibly managing fiscal risks. Also, there is a question of how to decouple public spending (which should be relatively stable) from the short-run volatility of resource prices.
A significant percentage of government spending in India goes towards the creation of new infrastructure like the construction of roads, ports, railways and power plants. Construction contracts, however, often have a reputation for disputes and conflicts between contractors and governments. Such disputes ultimately delay implementation of the contracts and increase total costs, adversely impacting development outcomes of the projects.
Many countries have found that Dispute Boards offer an effective mechanism for resolving these issues in a timely and cost-effective manner. These boards, composed of one to three members, are set up upon commencement of a contract and help the involved parties avoid or overcome disagreements or disputes that arise during the contract’s implementation. The boards are less legalistic, less adversarial, less time consuming and less costly than options for resolving disputes within the legal system, including arbitration and litigation.
A 2004 study (PDF) shows that with an almost 99% success rate. The savings in using these boards are enormous: another study indicates that in almost 10% of projects, between 8% and 10% of the total project cost was legal cost.
In keeping with recent global trends in the procurement arena, the World Bank is transforming and modernizing its procurement framework.
In the private sector, companies have long viewed maximizing of supply chains as key to healthier bottom lines. In the public sector, many governments have been moving from overly rule-based procurement systems to systems that focus on performance and achievement of development goals.