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Are Emerging Markets Leading the Way in Job Creation?

Submitted by Otaviano Canuto on Thu, 02/09/2012 - 10:09

Photo: Wiki Commons User_KozuchWith a few exceptions, industrialized nations are still struggling with unemployment, unable to recover completely from the 2008 economic crisis. In the U.S. things seem to be improving as the unemployment rate fell in January to 8.3 percent, its lowest level since early 2009, according to the U.S. Department of Labor’s Bureau of Labor Statistics. But all in all, whether it is lack of job opportunities for young people around the world, or that the global economy is not generating as many jobs as needed to keep up with labor force growth, the global job narrative is one of doom and gloom.


Nevertheless, there are reasons for optimism, particularly in the developing world. While major industrialized nations still struggle with unemployment, emerging markets are certainly doing better.


According to the new edition of Job Trends, released by the World Bank today, emerging economies continued their slow but steady job recovery in the third quarter of 2011. We are talking about countries like Brazil, China, Mexico and Turkey. But they are not the only ones. Across Eastern Europe and Central Asia, as well as in East Asia and Latin America, the employment picture has been improving over the past year in the 23 developing countries included in our global sample.

Why Dwell Time Matters

Submitted by Henry Sandee, co-authors: Julia Oliver, Natalia Cubillos Salcedo on Tue, 02/07/2012 - 00:00

The state-owned operator of Indonesia’s Tanjung Priok Port is taking major steps to decrease congestion at the country’s main gateway. The company, Pelindo II, recently announced it will increase storage fees at the port to discourage shippers from leaving containers there for long periods of time. It has also said it will install a new information technology system to better monitor and direct traffic at the port.

The two initiatives are an effort to boost the performance of a port that handles two-thirds of Indonesia’s international trade. The container traffic at Tanjung Priok has grown at a rate of about 20 percent the last two years and is expected to double by 2015. But containers arriving at the port spend an average of 6 days to obtain clearance and get removed, one of the highest “dwell time” rates in the region and up from 4.9 days in 2010.

Economists and government officials are trying to bring down this number. As a statistic, dwell time is a vital measure of a country’s ease of trade. When dwell time is high,

Should We Still Worry About Food Prices?

Submitted by Otaviano Canuto on Wed, 02/01/2012 - 09:31

Food prices are finally coming down after a year of spikes and high volatility. But we must remain vigilant. Prices of certain foods remain very high, and millions of people around the world are still at risk of suffering from malnutrition and hunger.

Let’s get to the numbers first. According to the World Bank’s latest Food Price Watch quarterly report released this week, global food prices declined 8 percent between September and December of 2011 due to increasing supplies and continuing uncertainty about the global economy. So in December 2011, the World Bank Food Price Index closed 7 percent below the December 2010 levels, and 14 percent lower than its February peak. Yet, the 2011 index average is 24 percent higher than the year before, and domestic prices of key staples remain dangerously high in many countries.

Take the case of maize. In Mexico, for instance, maize was up 106 percent from December 2010 to December 2011, making tortillas more expensive. The price of wheat in Belarus went up 88 percent, and sorghum increased 57 percent in Burkina Faso. No matter where you look, someone somewhere is paying more money to put food on the table, whether it is Mexican quesadillas or Burkinabe “to” (porridge).

It’s true that high food prices are not bad for everybody. While the poor in urban areas and rural net consumers of food are usually threatened the most, farm producers tend to benefit. Yet when there is so much price volatility--as we experienced last year--uncertainty very often gets in the way of reaping any gains.

Rise of non-tariff protectionism amid global uncertainty

Submitted by Julia Oliver, co-authors: Mariem Malouche on Tue, 01/31/2012 - 00:00

A troubling phenomenon is occurring in large, emerging economies: the gates are closing. Governments, skittish about global economic trends, are introducing new policies to limit imports and exports. The aim is to protect domestic industry in tough times, but the tools governments are using threaten to make their economic problems worse.

A December World Bank analysis documents a trend of creeping protectionism in countries such as Argentina, Brazil and Indonesia – all countries with burgeoning industry. Instead of tariffs, other more indirect policies are being used to hinder free commerce between countries. The Bank analysis, based on World Trade Organization (WTO) monitoring reports and data from the Global Trade Alert, a network of think tanks around the globe, found that the number of non-tariff measures (NTMs) –including quotas, import licensing requirements and discriminatory government procurement rules –showed an increasing trend in the first two years post-2008, and rose sharply in 2011. India, China, Indonesia, Argentina, Russia, and Brazil together accounted for almost half of all the new NTMs imposed by countries world-wide.

The measures take various forms. In December, amid a political shake-up, Indonesia announced its intention to

Political Economy in a Bad Economy

Submitted by Otaviano Canuto on Wed, 01/25/2012 - 10:19

As the world struggles to recover from the financial crisis, developing and developed countries alike depend on effective finance ministries and their associated central finance agencies (CFAs) to help deliver good fiscal outcomes. Although ministries of finance usually assume the most prominent role at the country level, supporting CFAs can assume responsibility for a number of essential duties, including macroeconomic forecasting, tax policy, budget preparation, and debt management—just to name few. Given the importance of these functions in times of crisis, enhancing the capability of these agencies in developing countries is more urgent now than ever.

According to the World Bank’s recently released Global Economic Prospects report, Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects, and developing countries should prepare for further downside risks. Moreover, the report notes that developing countries have less fiscal and monetary space for remedial measures than they did in 2008/09, and their ability to respond may be constrained if international finance dries up and global conditions deteriorate sharply.

Against this downgraded growth forecast, developing countries need to do everything they can to strengthen the capabilities of their CFAs. To do so, it is highly important to take a country’s political economy factors into account—that is, to analyze the interrelations of political and economic institutions and processes that influence national decision making.

Why it’s important to “Think Equal” when it comes to trade facilitation

Submitted by Jose Guilherme Reis, co-authors: Elisa Gamberoni on Thu, 01/12/2012 - 17:19

Gender equality can not only spur country competitiveness, but taking this aspect into account in trade related interventions can help obtain better outcomes. Often times, however, it can be difficult for practitioners to understand how to apply gender into their trade work.

There is indeed a gap between the literature and the type of trade interventions that are becoming increasingly important in the World Bank portfolio. The majority of the literature has focused on the relationship between gender equality as outcome and trade liberalization policies (measured usually by tariffs or openness to trade). While this type of liberalization and the exposure to the global environment is still a key area for support, there is only

Are Services the Trade of the Future?

Submitted by Sebastian Saez, co-authors: Stephanie Chen on Tue, 12/06/2011 - 11:27


You see trade in services happening all around us. Medical tourism is an increasingly popular option, as patients seek affordable medical treatment in countries such as Costa Rica and Thailand. American students are choosing to earn their undergraduate degrees in Europe and Asia rather than staying close to home. More companies are finding their survival depends on business process outsourcing in developing countries. This growing phenomenon of trade in services has become the most salient characteristic of globalization.

Just a few decades ago, services such as tourism, distribution and communication were considered in the economic literature to be stagnant sectors or of little economic relevance. But now, they are a key determinant of overall countries competitiveness. Many of the costs that determine the competitiveness of domestic industries are associated with the availability and reliability of services. Moreover, trade in services is growing faster than trade in goods. The share of developing countries in exports of world services increased from 11 percent in 1990 to 21 percent in 2008.

In fact, the topic of trade in services has become a subject of recent debate among economists – between those who believe manufacturing will continue to prevail and those who side with services as the future of trade.

Food Prices, Financial Crisis and Droughts

Submitted by Otaviano Canuto on Wed, 11/23/2011 - 11:51

water and foodGlobal food prices remain high and volatile, affecting the poorest countries the most. Global prices might not be at their 2008 record high, but they are still well above their levels a year ago. For millions who are already vulnerable, events like the droughts in the Horn of Africa add to their hardships while continued market turmoil increases uncertainty in the global economy.

And yet, for many it would look like the food crisis and the economic woes -- both past and present -- are two different events with little in common. In fact, experts will explain to you that a weak economic recovery would be a good thing for people struggling to put food on the table because lower demand would push food prices down. That's true, but the food price crisis and the financial troubles are not two completely separate things.  The food-price crisis that began in 2008 and the financial crisis of that year were intimately connected. Therefore, financial reform must include derivatives and other financial instruments related to developing countries and their farming sectors.

As Vera Songwe shows in the Economic Premise series note Food, Financial Crisis, and Complex Derivatives: A Tale of High Stakes Innovation and Diversification, "developing countries, particularly food-importing ones, were part of the early wave of the financial crisis via food price increases." 

Shoe Molds and Scuba Divers: How Natural Disasters Affect Our Supply Chains

Submitted by Thomas Farole, co-authors: Julia Oliver on Wed, 11/16/2011 - 14:58

Like the massive earthquake in Japan earlier this year, the floods in Thailand are again exposing the vulerabilities of fragmented global supply chains.


Last month, a team of economists from PREM’s International Trade Department encountered some flooding side-effects during a visit to the Indonesian production site for ECCO, a Danish company that manufactures footwear. In order to transfer production to the factory in Indonesia, the workers needed the specific shoe molds used in the Thai factory. But there was a problem: The Thai factory was under three meters of water.


These specialized molds manufactured in the Thai factory would have taken several weeks to manufacture, which would have further delayed production. So ECCO hired scuba divers to enter the Thai factory and recover the molds. They then shipped them via air to other factories around the region, including ECCO Indonesia.


Shoemakers are not the only businesses with drowned components. Automotive producers are also hiring divers to rescue molds from underwater Thai factories, according to the Financial Times. Honda, for one, has said it will cut worldwide production by 50 percent because of a shortage of specialty parts. Reuters reports that computer hard drive prices have

Small Is Beautiful in Job Creation

Submitted by Otaviano Canuto on Wed, 11/16/2011 - 11:57

Investing more on roads, bridges and schools is an essential part of President Obama's American Jobs Act. If this is important in the current U.S. context, the role of both infrastructure and education in job creation is even more fundamental in developing countries, where there's much more to be done than in the U.S. and other advanced economies.

Let's start with the global economic context. Many developing countries, particularly in East Asia and Latin America, have been resilient in the midst of the economic crisis. And in some, like Brazil, employers are actually having some trouble finding enough qualified labor for certain industries. But as I explained in a prior blog titled Jobs, Jobs, Jobs, in most economies the employment picture is not a rosy one. According to Job Trends, released by the World Bank in September, labor market recovery from the financial crisis remains sluggish in some countries, with employment and earnings growth far below their pre-crisis rates.