Syndicate content

Where’s the Romance? Special Economic Zones and Cities

Austin Kilroy's picture

SEZs and cities are often wed in a marriage of convenience. SEZs have a basic need for what cities can offer: deep and specialized labor pools; specialized suppliers and business services; connectivity to national and global markets; and favorable lifestyles for potential investors. Where SEZs find themselves isolated from cities, they are often barren of firms, empty of investors, and die a lonely death. Most SEZs can’t give birth to jobs unless they are fertilized by cities.

But can SEZs and cities achieve more if they get beyond a physical relationship? What kind of problems can they solve by talking and collaborating together? Can they help achieve each other’s long-term goals?

There are surprisingly few examples of romantic partnerships. Indeed, the relationship between SEZ and city can even be adversarial. SEZs may think their beauty depends on their tax-free status, often including exemptions from municipal taxes. Once they become pregnant with firms and jobs, SEZ developers and operators are (understandably) loath to get involved with municipal projects beyond those necessary to help their tenant companies be operational.

A city meanwhile — with multiple spending obligations and often carrying the baggage of a difficult past — may see a successful SEZ as a cash cow to pay for its own projects. Yet cities tend to provide relatively few direct services to the SEZ that would justify these taxes. Trash collection, internal infrastructure maintenance, and security are usually provided by the SEZ management itself. SEZs sometimes even find themselves paying for and building the core infrastructure that they were expecting a city to provide. The marriage can turn into a nightmare, characterized by repression and abuse.



One of the few examples of an evolving relationship between an SEZ and the municipality is between the Suzhou Industrial Park (SIP) and Suzhou municipality in China. SIP initially made losses of US$90 million in 5 years, partly owing to disinterest from the city, which was more interested in the Suzhou New District on the other side of the river. Subsequently, the central government restructured the tax-sharing formula for SEZs, allowing the Suzhou municipal government to get a 10% share in all taxes collected from the zone; majority ownership was transferred from Singapore to Suzhou; and Suzhou’s vice-mayor became chief executive of the SIP. This alignment of incentives contributed to a sea-change in the relationship between the zone and the city; investments rose by more than 150 percent in a single year (2000 to 2001) and the park made its first net profit of US$3.8 million.

So, what would a marriage counselor recommend for SEZs and cities to get their relationship working really well? An enhanced and fuller relationship can help them both achieve their goals.
 

The Triumph of Strategy: Germany's 2014 World Cup Victory Shows How Shrewd Planning Can Sharpen Competitiveness

Christopher Colford's picture

The great-power G8 have been bickering about geopolitics, the economic G20 have been fretting about growth, and the aspiring G24 have been jostling for policy influence. But this summer’s ultimate contest in international relations has focused instead on the elite G32: the group of 32 countries that sent the world’s top-performing soccer teams to the final brackets of the World Cup tournament.

Global rivalries based on fine-tuned football finesse – not dominance in diplomacy or brute force on the battlefield – framed this summer’s highest-profile competition for international supremacy.

Amid the lengthening late-summer shadows that herald the final days before the September rentrée, thoughts of the midsummer marathon surely warm the memories of World Cup-watchers who recall the thrills of the June and July festivities before the JumboTron – with throngs packing city squares worldwide, as well as filling the World Bank Group's vast Atrium (and television hideaways all around the Bank) on game days.

By the time of the final match, even many committed fans of other national teams seemed to admit that, in the end, Germany deserved its hard-earned victory – winning 1-0 in overtime against resilient Argentina – thanks to the team's technical skills and tightly coordinated teamwork.

The tournament’s most dramatic highlights – the agility of goalkeepers Guillermo Ochoa of Mexico and Tim Howard of the United States; the spirited hustle of underdogs like Ghana and Croatia; the epic 7-1 shellacking suffered by humbled host-country Brazil; the heart-stopping offside call against Argentina that nullified an apparent final-match goal – will deservedly dominate fans’ conversations as they await the next World Cup spectacular. And videos of the overtime heroics of two substitute players – André Schürrle, who made a picture-perfect cross to Mario Götze, who seamlessly slid the ball from his chest-trap downward for a left-footed volley past Argentina’s goalie Sergio Romero – are destined to be replayed forever.

But before the fine details of Germany’s triumph recede in fans’ hazy memory, it’s worth recalling the long-range strategies it required for the new champions to envision winning the crown. The success of the Nationalmannschaft required even more than the midfield mastery of Toni Kroos and Bastian Schweinsteiger, the exuberant playmaking of Sami Khedira, and the goal-scoring prowess of Thomas Müller. Along with disciplined precision on the field, Germany’s success was also driven by organizational skill on national planners’ drawing board.

A decade in the making, victory was patiently built through the Deutscher Fussball-Bund’s national plan that reportedly cost a billion euros or more – creating a coordinated national system of youth leagues, sports facilities, training regimens and individualized skill-building for players selected to advance toward the Bundesliga. Insightful long-range planning, born of adversity, paved the way to success: Germany’s football establishment realized that its system needed a sweeping overhaul after being soundly defeated in 2000, when Germany was knocked out of the European Championship without winning a single game. Germany had not won the World Cup since 1990, but the newly refocused German football system marshalled its long-term resources. After years of sharpening its competitive edge, Germany's hyper-efficient system has now earned the sport’s ultimate prize.

A Tale of Two Competitive Cities: What Patterns Are Emerging So Far?

Z. Joe Kulenovic's picture

As noted in a blog post earlier this year, the World Bank Group is pursuing a Competitive Cities Knowledge Base (CCKB) project, looking at how metropolitan economies can create jobs and ensure prosperity for their residents. By carrying out case studies of economically successful cities in each of the world’s six broad regions, the Bank Group hopes to identify the “teachable moments” from which other cities can learn and replicate some of those lessons, adapting them to fit their own circumstances.

The first two case studies – Bucaramanga, in Colombia’s Santander Department, and Coimbatore, in India’s State of Tamil Nadu – were carried out between April and June 2014. Although they’re on opposite sides of the globe, these two mid-sized, secondary cities have revealed some remarkable similarities. This may be a good moment to share a few initial observations.
 
Bucaramanga and Coimbatore were selected for study because they outpaced their respective countries and other cities in their regions, in terms of employment and GDP growth, in the period from 2007 to 2012. Faced with the same macroeconomic and regulatory framework as other Indian and Colombian cities, the obvious question is: What did these two cities do differently that enabled them to grow faster?

Bold Ideas on ‘Shared Prosperity’ Reshape Economic Theory -- and Now Influence Policymaking in the White House

Christopher Colford's picture

Whichever of the 18 worthy books on economics and finance eventually ends up winning this year’s Financial Times/McKinsey “Business Book of the Year Award,” it’s already clear which work has had the most transformational effect on this decade’s intense debate on economic policy. One of the finalists in that book competition, “Capital in the Twenty-First Century” by Thomas Piketty, has been hailed as a landmark analysis of the inexorable trends driving the modern-day economy, with Piketty’s scholarship abruptly detonating a debate that has profound implications for public policy and long-term economic theory.

Washington policymakers may sometimes be slow to embrace dramatic and innovative ideas about economics, but the impact of Piketty’s reach and relevance – especially after the financial Crash of 2008 – became even clearer when the chairman of the White House Council of Economic Advisers recently led a scholarly seminar at the World Bank Group, describing the impact of Piketty’s thinking on the Obama Administration’s approach to economic policy. If the White House itself is focusing on Piketty’s diagnosis of the ills now afflicting many Western economies, then his analysis should clearly rivet the attention of everyone who’s concerned with building shared prosperity globally.

When Jason Furman, the President’s chief economic adviser, came to the Bank as part of the Development Economics Lecture Series to analyze Piketty’s logic – describing how Piketty’s “Capital” is now being factored into the White House’s policymaking – the rapt attention of the throng in the Bank’s Old Board Room (and spilling out into the adjoining corridors) illustrated how Piketty’s work has been swaying economists’ debates.

Those debates have consumed policy-watchers not just at the Bank, the International Monetary Fund and other leading global financial institutions, but also at the Federal Reserve System and in policy journals and university economics departments worldwide. Even financial firms that epitomize Wall Street’s do-what-works, drop-all-ideology pragmatism – like Standard & Poor’s, which recently issued a candid analysis of how “too much inequality can undermine growth” – warn of the dangers of extreme inequality.

The video of the event can be viewed by clicking on the screen directly below, or by linking to the World Bank Group website: http://live.worldbank.org/lessons-for-inclusive-growth.

Development Economics Lecture by Jason Furman


Furman’s DEC Lecture thus underscored the transformation in economic thinking that has been occurring, thanks in large part to Piketty. Mainstream economic institutions are newly attentive to the widening economic divide – the chronic gaps within each nation, and the enduring chasm between developed and developing nations. Furman himself helped contribute to the knowledge-base about inequality when he served on the Bank staff as a Senior Advisor to then-Chief Economist Joseph Stiglitz.

Furman’s lecture was the latest in a series of Bank discussions on inequality, including an InfoShop forum with Chrystia Freeland – formerly a journalist with the Financial Times and Thomson Reuters who is now a member of the Canadian Parliament – discussing her celebrated work “Plutocrats: The Rise of the New Global Super-Rich and the Fall of Everyone Else.” Freeland applauded the voluminous Bank research – including the work of Branko Milanovic, the esteemed former Bank economist who is now at the City University of New York – that has helped lay the foundations of the inequality debate.

Given the linear logic that was spelled out in Furman’s data-rich DEC Lecture, it’s little wonder that Piketty’s research has inspired accolades from scholars like Milanovic, the author of “The Haves and the Have-Nots,” who has hailed “Capital” as “one of the watershed books of economic thinking.” Piketty’s work has also been praised as “the most important economics book of the year, and maybe of the decade” by Nobel Prize-winning economist Paul Krugman of the New York Times, and has been lauded as “an extraordinarily important” work “of vast historical scope, grounded in exhaustive fact-based research” by Martin Wolf of the Financial Times.

Introducing his lecture, entitled “Lessons for Inclusive Growth, from the U.S. and the World,” Furman said that “the ultimate test of economic performance” is “ensuring that the benefits of growth are broadly shared.” Such a broad sharing of prosperity may once have been a standard feature of advanced Western economies – but for at least the last 30 years, income inequality and wealth inequality have dramatically widened. Piketty’s meticulous work shows why.

As Furman detailed, Piketty’s data-driven research confirms what many economy-watchers have long suspected – and what many long-suffering wage-earners have long felt amid the aftermath of the Crash of 2008 and the Great Recession that followed: The trend toward the concentration of capital in modern-day industrialized economies is intensifying.

Crucially, Piketty contends that such a concentration is not an accident: Instead, the “rich get richer” phenomenon is a fundamental feature of the way that income and wealth are distributed in modern-day capitalism, for a straightforward reason: The rate of return to capital, over the long term, is higher than the rate of return to labor.

Capital-income inequality is thus self-perpetuating. As Furman explained: “How much wealth you have today is a function of how much income you had in the past, and a function of your rate of return, which itself is higher for higher-wealth households.”

Or as Piketty, aided by his skillful translator Arthur Goldhammer, more poetically declares: “The past devours the future.”

PISA data on financial literacy: Unanswered questions on developing financial skills for the broad student population

Margaret Miller's picture

A few weeks ago, the results of the OECD’s PISA (Programme for International Student Assessment) module on financial literacy were revealed, with Shanghai taking top honors in this category – just as it has in the last two rounds (in 2009 and 2012) on the traditional academic curriculum (reading, math and science).
 
This is no coincidence, as the OECD results and many other studies suggest a close relationship between education levels and academic performance in math and reading comprehension and scores on financial literacy tests.
 
In the PISA report, the correlation coefficients between financial literacy scores and performance in mathematics and reading were 0.83 and 0.79 respectively across 13 OECD countries in the survey sample. For high performers like Shanghai and New Zealand, these correlations were even stronger: 0.88 for mathematics, 0.86 for reading.

While waiting for general improvement in academic performance is one path to improved financial literacy, the urgency of addressing financial skills for today’s youth has led many educators and policymakers to look for more immediate steps that can be taken, including financial education interventions at school. The PISA results, however, don’t include an assessment of the value of possible financial literacy curricula, due to the “limited and uneven provision of financial education in schools.” That factor makes comparisons across countries difficult, as described in the report.

Lessons learned from policymakers on how to establish a financial consumer protection supervision department

Jennifer Chien's picture

Financial consumer protection has become a hot topic among financial-sector policymakers in recent years. Consumer protection is increasingly recognized as a critical complement to financial inclusion, particularly after the global financial crisis.

Enabling consumers to understand what financial products they’re buying, and enabling them  to “comparison shop” among providers, can lead to safer access to financial services as well as to broader financial stability.

As a result, many policymakers around the world have been putting in place laws and regulation on financial consumer protection, as evidenced by the Global Survey on Consumer Protection and Financial Literacy. At the same time, international organizations have issued guidelines and principles on designing financial consumer protection policy and regulatory frameworks, such as the G-20’s High-Level Principles on Financial Consumer Protection and the World Bank’s Good Practices on Consumer Protection and Financial Literacy.

But less guidance exists on the tricky question that immediately follows new laws and regulation: How do you implement and enforce these new rules? Policymakers have many considerations to juggle, from legal and technical issues to practical and operational concerns. Unclear legal mandates, limited supervisory capacity, the different skill sets required of staff, the need for supervisory tools adapted to financial consumer protection, and the relationship with prudential supervision – these are just some of the many questions facing regulators who are seeking to establish a financial consumer protection supervision department (“FCPSD”).

The latest technical note from the Financial Inclusion and Consumer Protection team at the World Bank (“Establishing a Financial Consumer Protection Supervision Department: Key Observations and Lessons Learned in Five Case Study Countries”) seeks to shed light on this area of growing concern. Surveys and interviews were conducted with financial consumer protection supervisors in Armenia, the Czech Republic, Ireland, Peru and Portugal to gather concrete, practical insights from the experiences of these countries in setting up FCPSDs.

There is obviously no “one size fits all” approach to establishing a FCPSD, as the right approach will be highly dependent on country context. Nevertheless, the five case study countries highlight a few common obstacles and lessons learned.

Shaping the Debate on Promoting Jobs and Competitiveness in Small Island Developing States

Ivan Rossignol's picture

The United Nations has declared 2014 as the International Year of Small Island Developing States (SIDS), in recognition of the contributions this group of countries has made to the world, and to raise awareness of the development challenges they confront – including those related to climate change and the need to create high-quality jobs for their citizens.

The Third International Conference on SIDS in September in Apia, Samoa will be the highlight event.  The World Bank Group is helping shape the debate on both climate and jobs with a delegation led by Rachel Kyte, the Group Vice President and Special Envoy for Climate Change, and with senior-level participation in the conference’s Private Sector Forum.

Is the global jobs agenda relevant to small islands states?

Tackling the challenges related to the jobs agenda in large and middle-income countries could be seen as the most significant issue for the Bank Group’s new Trade and Competitiveness Global Practice, of which I’m a member. Yet the Minister of Finance of Seychelles recently challenged my thinking on this. 

At the June 13  joint World Bank Group-United Nations' High-Level Dialogue on Advancing Sustainable Development in SIDS (which precedes the September conference on SIDS), the presentation by Pierre Laporte, the Minister of Finance, Trade and Investment of Seychelles – who is also the chair of the Small States Forum – led to a lively discussion on various job-creation and growth models that the SIDS countries may want to pursue. 

The sentiment among SIDS leaders was that one-size-fits-all solutions will not do when it comes to jobs and growth.  Yes, they do want to continue to address the tough fiscal challenges they face, but they want to tackle them while creating job opportunities for their citizens. 

Decades of reforms have not helped SIDS grow at a rate similar to the rest of the world: On average, their pace of job creation is about half the global rate. The lack of opportunities felt by many generations resulted in a heavy “brain drain” that exceeds the level seen in other developing countries. 

It is becoming very clear that business as usual in SIDS will not do.  Creative solutions need to be found now.

Behind the Scenes of 'Startupland': A Documentary that Tells the True Stories of Entrepreneurs

Toni Kristian Eliasz's picture


Try to search for stories that feature the growing pains and gains of growth-oriented technology startups – content that is not only entertaining, but of high quality and most important, educating. It is a surprisingly hard task in today's economy, where entrepreneurship is booming again.

What does it take to have vibrant growth for all?

Paula Tavares's picture



Photo Credit: Mauricio Santana – Women’s Forum 2014

The question was posed at this year’s Women’s Forum Brazil held in São Paulo, Brazil, on May 26 and 27. In a country bustling with the World Cup and gearing up for presidential elections, "Vibrant Growth for All" was a fitting topic. As more than 500 women and men involved in politics, business, civil society and academia from all regions of Brazil, countries of Latin America, the United States and Europe gathered together, women’s full participation in the economy and society was center stage in the discussions. The setting was quite appropriate: Women have made great strides and have increasingly taken the stage in the country. And starting from the top – the country’s President – and in all sectors of society and the economy, women are present and continue to take on leading positions, with many good examples present at the plenary room and throughout the two-day event.

Kicking off with an impassioned plea for the release of the abducted Nigerian schoolgirls and the keynote address given by Minister of State of Public Policies for Women Eleonora Menicucci, focusing on the achievement of economic autonomy for women in Brazil and initiatives to end violence against women such as the “Eu Ligo” campaign (with the double meaning in English: “I call / I care”), the forum throughout was indeed a vibrant event.

The plenary sessions and panels that followed were brilliantly composed of high-level women in leadership positions from Brazilian and international companies, small and medium-size enterprises (SMEs) and of government and civil society, including the CEO of Boeing Brazil, the CEO of Brazilian Tam Airlines, the CEO of the Women’s Forum for the Economy and Society, and the Clinton Global Initiative Director for Women and Girls, to shed light on topics such as business and human rights, marriage, machismo, and social investment in women, incentivizing leadership and talent, among others.

O que é preciso para criar uma economia próspera para todos?

Paula Tavares's picture



Photo Credit: Mauricio Santana – Women’s Forum 2014

A pergunta foi o foco do Fórum de Mulheres realizado este ano nos dias 26 e 27 de maio, em São Paulo, Brasil. Em um país movimentado com a Copa do Mundo e se preparando para eleições presidenciais, o tema ‘Criar uma Economia Próspera para Todos’ foi bastante propício. Mais de quinhentos homens e mulheres participantes, entre políticos, empresários, membros da sociedade civil e acadêmicos de todos os cantos do Brasil, de países da América Latina, dos Estados Unidos e da Europa se reuniram para colocar em pauta – e no centro do palco – a questão da plena participação das mulheres na economia e na sociedade. O cenário foi bastante adequado: um país em que as mulheres conquistaram grandes avanços e cada vez mais estão em posições de destaque. Do mais alto cargo - da Presidente do país - e em todos os setores da socidade e da economia, as mulheres estão atuantes e continuam a assumir cargos de liderança, com muitos bons exemplos presentes nas sessões plenárias e durante todo o evento.

O Fórum foi de fato próspero e marcante. Começou com um apelo pela libertação das estudantes Nigerianas sequestradas seguido da palestra de abertura, dada pela Ministra da Secretaria de Políticas para as Mulheres, Eleonora Menicucci, focando na conquista da autonomia econômica para as mulheres no Brasil e em iniciativas como a campanha “Eu Ligo” pelo fim da violência contra as mulheres.

As sessões plenárias e painéis que se seguiram, todos compostos de brilhantes exemplos de mulheres em posições de destaque e de liderança em empresas brasileiras e internacionais, pequenas e médias empresas e no governo e na sociedade civil, como a presidente da Boeing Brasil, a presidente da companhia aérea TAM, a presidente do Fórum de Mulheres e a diretora para Mulheres e Crianças da Clinton Global Initiative, abordaram temas relevantes como negócios e direitos humanos, casamento, machismo, e investimento social em mulheres, incentivando talentos, entre outros.

Pages