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The essentials of a manufacturing ecosystem

Aref Adamali's picture

Value addition through manufacturing has been a major focus of economic policymakers across the world, and at times with remarkable success, most famously in East Asia. Initial ‘Asian miracles’ in places like South Korea have since been eclipsed by the meteoric rise of manufacturing in China, which has grown its exports in manufactures by 18 percent a year over the past 10 years, compared to a global average of 7 percent (ITC Trade Map data).

'Flying geese'
 
Most countries generally seemed to follow a basic pattern, initially establishing manufacturing credentials in light manufacturing, such as in textile and apparel, but then in time moving on from such products to higher-value-added and more complex products. As they moved on and up, they opened space for other countries to move into the initial entry products, following the so-called ‘flying geese’ model of division of labor.





There have been noticeable absences though, with not all regions having moved into manufacturing. This is partially the case with Central and South America, but most strikingly with Sub-Saharan Africa.  
 
What can be done to support countries in their quest to deepen their manufacturing sectors, and extract the jobs and technological development that this can offer? How can they develop the kinds of deep and comprehensive manufacturing ecosystems that have enabled China to maintain investment despite fast-rising labor costs?

Rabobank Foundation and the World Bank team up to strengthen financial cooperatives for agrifinance

Juan Buchenau's picture

The World Bank and Rabobank Foundation are teaming up to strengthen financial cooperatives in rural areas to improve financial services for smallholder farmers and agricultural SMEs.
 
Financial services in rural areas are scarce and expensive. Servicing smallholder farmers spread across wide geographical areas isn’t attractive to mainstream financial institutions as their transactions are small, their cash flows seasonal and returns on investments can be risky due to potential crop failures or weather calamities.

To get access to savings and credit, rural households and farms often establish cooperative financial institutions (CFIs). While CFIs have a strong local presence and knowledge, they often have weak institutional capacity and governance, lack access to information technology, and suffer from political interference. Also, the laws regulating CFIs are often inadequate and supervision is weak, all of which hampers CFIs’ ability to deliver financial services. Often, CFIs don’t fall under the purview of the main financial sector regulator and supervisor, but of other entities that don’t always have the required capacity and expertise.

Why Juba?

Jean Lubega-Kyazze's picture
Construction in Juba
 
The World Bank Group continues to engage in South Sudan despite the odds, and for good reason

Tell people you work in Juba – capital of South Sudan and now the newest member of the East African Community – and more often than not they won’t know where to find it on a map. Those of us who know are often met with doubtful stares when we talk about enhancing trade and competitiveness in a country that is struggling to emerge from decades of grueling civil war, not to mention a 98 percent illiteracy rate, inadequate capacity, a maternal mortality rate of 254 for every 100,000 births and a 250 out of 1,000 infant mortality rate.

Fact is, Juba is situated in the heart of Africa, where such challenges, and the daunting figures that go along with them, exist. But look deeper and you see commitment, potential, and signs of the World Bank Group’s positive impact. In short, you see opportunity.

Unlocking innovation in the Middle East through financial inclusion

Simon Bell's picture


I recently attended an SME Conference in Jordan around SME Finance and Employment – extremely important issues in a troubled region.  All participants agree that much more needs to be done to address the lack of jobs in the region and to increase financial access at all levels, to individuals, households and small and medium scale enterprises (SMEs).

The Middle East remains the most financially excluded region in the world despite being a middle income region.

Only 4% of unbanked adults in the Middle East say that they don’t have an account because they don't need one. In other words, it is clear there is widespread unmet demand for financial services.

A person living in the Middle East is less likely to have a bank account than is a low-income person living in Africa or South Asia, and significantly less likely than a person living in Latin America, Eastern Europe or East Asia from comparable middle income country or region. This poses a dilemma – why?

'Davos Every Day': Parliamentarians' ideas enrich the Spring Meetings debate, advancing the Good Governance agenda

Christopher Colford's picture



At the Global Parliamentary Conference 2016, the perspectives of parliamentarians from 70 countries energized the debate before the Bank's and the Fund's Spring Meetings. From left to right, on the Preston Auditorium stage: Jeremy Lefroy, a Member of Parliament in the U.K., who served as the conference chairman; IMF Managing Director Christine Lagarde; and World Bank President Jim Yong Kim.    

Did you happen to miss the Davos conference over the winter? I feel your pain: Somehow, for the umpteenth year in a row, my ticket to the World Economic Forum in Davos must have gotten lost by the Postal Service, too.

Not to worry, however: Twice a year, in April and October, Washington’s motto might as well be “Davos Every Day” – as the great and the good of globalization gather for the formal meetings of the World Bank Group and the International Monetary Fund.

The Bretton Woods siblings are just-now recovering from their semiannual tsunami of scholarship and diplomacy, with still-dazed staff members sorting through their accumulated post-Meetings mountains of newly published policy monographs, economic analyses and deepthink datapoints. This spring’s sprint focused, as is customary, on the speeches, statements and seminars with the Bank’s and the Fund’s scholars, along with the insights of the institutions’ core constituents: the Finance Ministers and central-bank governors who oversee their countries’ daily economic policymaking.

But there was an additional governance-focused feature at this spring's gathering: Meetings-goers also gained the valuable perspective of  the almost 200 lawmakers and observers from 70 countries who convened in Washington, for just the second time, for the annual Global Parliamentary Conference. The gathering was held under the auspices of the Bank- and Fund-sponsored Parliamentary Network, which is now chaired by Jeremy Lefroy, a member of the U.K.’s House of Commons representing Stafford.

Hearing the viewpoints among the lawmakers, just before the executive-branch officials began the Spring Meetings formalities, provided Washingtonians a chance to take the pulse of an additional cohort of opinion leaders whose work is indispensable in delivering effective governance. The conference first brought the parliamentarians to Washington in 2015 – and now the Parliamentary Network is aiming to make Washington the venue for their conference every year.

Linking the lawmakers’ conference with the meetings in Washington will provide a valuable opportunity for the parliamentarians to hear more about the latest research findings of the Bank and the Fund. Moreover, it will help the Bank’s and the Fund’s headquarters staffs in Washington hear, more directly, about the policy priorities and development ideas of the leaders who frame their countries’ laws – some of whom may someday, in their turn, become the Ministers and policymakers who lead their countries’ executive-branch agencies.

Vigorous ideas for ‘Powering Up Growth’ through energetic policy reforms

Christopher Colford's picture
In an era of chronically slow economic growth, what steps can policymakers take to help jump-start productivity, spur employment and build long-term wealth? Recognizing that the private sector must create about 90 percent of the economy’s future jobs, which policy reforms can most effectively encourage private-sector investment?

Questions like those – focusing on the private sector as the principal driver of growth, with deft public policy as an indispensable catalyst – inspired a dialogue among some of the developing world’s most experienced policymakers at a major forum, “Powering Up Growth: Ideas for Beating the Slowdown,” during the recent Spring Meetings of the World Bank Group and the International Monetary Fund. All four government Ministers on the panel – from both commodity-exporting and  -importing countries – voiced a sense of urgency, describing their efforts to attract private investment to spur job creation, amid a global economy that seems destined for prolonged weakness.

Before the policymakers ascended the Preston Auditorium stage, sobering updates had arrived from the Bank and the Fund: The Bank’s latest forecast for global growth has been lowered from 2.9 percent to 2.5 percent – with the caveat that this latest forecast is subject to further downside risks. That downward revision is in parallel with the Fund’s similar projection, which sees global growth this year in the neighborhood of just 3 percent.

Policymakers worldwide are eager to explore any option to try to lay the foundation for an eventual return to a long-term economic expansion. It was clear that the panelists in the “Powering Up Growth” event – which was convened by Jan Walliser, the Vice President for the Bank Group’s practice group on Equitable Growth, Finance and Institutions (EFI) and organized by the Global Practice for Macroeconomics and Fiscal Management (MFM) – were focused on long-term structural changes that can energize the private sector’s ability to drive growth.
 
Powering Up Growth: Ideas for Beating the Slowdown


The panelists – from Bolivia, Pakistan, Angola and Ukraine – represented countries from different regions and at various levels of economic development, but they shared a determination to jump-start growth through reforms that will strengthen the private sector’s long-term confidence. The Ministers, at times, seemed to envision opportunities, not just for short-term structural adjustment of their priorities or medium-term structural reform of their policy farmeworks, but for far-reaching structural transformation of their economies and societies.

Development finance frontline: Senegal’s Strategic Investments Fund

Håvard Halland's picture

 

Amadou Hott
Amadou Hott 

“The only way to achieve the sustainable development goals is to use more public capital strategically for unlocking private investment, particularly for infrastructure,” says Amadou Hott, CEO of the Senegalese Fund for Strategic Investments.

The Senegalese Strategic Investments Fund (FONSIS, for its acronym in French) is part of a rapidly expanding network of state-sponsored strategic investment funds (SIFs) now emerging in countries at all income levels. The World Bank Group and its partner, the Public Private Infrastructure Advisory Facility, work with FONSIS in an advisory role, and FONSIS provides input to the Bank’s research on SIFs. In the World Bank Group’s recently issued Climate Change Action Plan, SIFs feature as one of the tools to crowd in private capital to climate mitigation and adaptation projects.

Mr. Hott was in Washington last week for the Spring Meetings, and we caught up with him during a break in his schedule. Mr. Hott represents a new generation of African financial sector professionals and leaders, who have returned to opportunities at home after earning degrees at leading global universities and gaining extensive experience on Wall Street, in the City of London, and in other global financial centers. He was also nominated a Young Global Leader by the World Economic Forum.

Q. FONSIS has been doing some very interesting projects. Could you tell us about some of your signature investments?

 POLIMED (Pôles d’Infrastructures Médicales)
Pôles d’Infrastructures Médicales

One project that I think is innovative is our building and commercial operation of the POLIMED (Pôles d’Infrastructures Médicales) diagnostic center within the public hospital of M’Bour, a coastal city 70 kilometers from Dakar. The hospital itself couldn’t afford to buy the required advanced technological equipment, and we were asked to build and run the diagnostic center as a commercial operation, with the public doctors and technicians of the hospital providing the medical services to keep down patient fees. Since operations started at the end of December 2015, more than 4,000 patients have been diagnosed, and the financial results are looking good so far. We intend to replicate this model all over the country to upgrade our medical infrastructure.

Another interesting project is the 30 megawatt, €41 million, solar energy power plant Santhiou Mékhé, and a 9 km transmission line to the grid. We closed that deal this past February. We were approached by the project’s initial developer, and our role was to structure the financial side of the project, help finalize the power purchase agreement with the off-taker, reach out to potential investors, and negotiate the debt and equity contributions. We also put down about €1.0 million of our own capital as a cornerstone investor, to give the project credibility at the initial stage. We expect the plant to be producing electricity in late 2016. I think we’ve achieved a good result: about €40 of external equity and debt co-investment for every euro that we ourselves invested. In general, we aim to achieve a multiplier of around 10 on our own invested capital, but we achieved an exceptionally high multiplier in this case, as we managed to secure a debt/equity ratio of 80/20.

Pakistan Microfinance Network commits to reaching 50 million new depositors through UFA2020 initiative

Syed Mohsin Ahmed's picture

Two billion people worldwide still lack access to formal and regulated financial services. In 2015, the Bank Group with private and public sector partners committed to promoting financial inclusion and achieving Universal Financial Access by 2020.  We've invited our partners to reflect on why they've joined the UFA2020 initiative and how they're contributing toward this goal. This contribution comes from the Pakistan Microfinance Network. #FinAccess2020


Photo Credit: Muhammad Kaleem, Courtesy of the Farmers Friend Organization (FFO)

Kaneez Fatima is a 50 year-old entrepreneur living in Sheikhupura, a city situated 40 km northwest of Lahore, Pakistan. Years before when her husband passed away, she had no idea to find the means for raising a family of six and her future seemed bleak. In her childhood she had acquired the skill of stitching footballs, and she thought about setting up her own workshop. But as a woman in a male dominated market, in an already challenging entrepreneurial environment, she faced what seemed to be an uphill challenge.

Sadly, Kaneez is not alone. World Bank Group Findex data estimates that Pakistan is home to 100 million unbanked people, or 5.2% of the world’ unbanked population, and the ‘Access to Finance Survey 2015 commissioned by the State Bank of Pakistan states that only 23% of adults use formal financial services offered by formal financial intermediaries with only 16% of Pakistani adults have an account with a formal financial institution.

Macro hype, micro hope: Optimists champion ‘Community-Led Development’

Christopher Colford's picture

Now there’s a guy who really puts the full-scale dismal into “the dismal science” of economics – spurring optimists to quickly seek out more hopeful visions of the future.

Those seeking a glimmer of hope about the economic future were well-advised to keep their expectations low as they awaited the gloomy analysis by Prof. Robert J. Gordon, the esteemed economic historian from Northwestern University, who spoke at the World Bank Group’s Macrofiscal Seminar Series on March 31. As anticipated, Gordon’s expertly documented but relentlessly downbeat scenario, based on his latest book, “The Rise and Fall of American Growth,” persuasively made the case for a future of chronically sluggish growth in the world’s advanced economies.

Gordon’s chilling projections combine some of the darkest aspects of Lawrence Summers’ worries about “secular stagnation,” Christine Lagarde’s lamentations of a “New Mediocre” and private-sector leaders’ struggle to strategize for the “New Normal.” Gordon’s bleak thesis foresees “little growth” – although, significantly, not zero growth – as the developed world’s weary economies endure perhaps decades of drift.

Policymakers in the world’s largest economies are surely exasperated by the painstaking crawl out of the global financial crisis – yet they don’t have much positive news to look forward to, asserts Gordon. With “declining potential productivity growth” compounding the impact of declining population growth and a declining labor-force participation rate, there’s probably no technological deus ex machina that can soon propel the world’s advanced economies toward restored prosperity.

That viewpoint defies the techno-utopian visions that have been so eagerly peddled to anxious Western voters, who can only dream of a return to brisk late-1990s-style growth. Quipped the Macrofiscal seminar’s discussant, Deepak Mishra: Gordon “has made a career of busting the technology hype.”

Yet Gordon’s logic need not trigger total despair among the Bank’s poverty-fighting professionals and their counterparts at other development institutions. Gordon emphasized that his analysis is about the American economy, and, to some extent, about the mature economies of Western Europe. His book’s foreboding predictions, he said, do not extend to developing economies, which enjoy “great potential for growth.”

For can-do pragmatists who strive for stronger growth and sustained progress in developing economies, there’s a ready antidote to Gordon-style macroeconomic gloom. By happenstance, immediately after Gordon delivered his grim analysis in the Bank’s J Building auditorium, optimists seeking inspiration needed only to cross the street to the Bank’s Main Complex to hear an energetic appeal for greater hands-on activism.

With an update on the movement for Community-Led Development (CLD), a seminar sponsored by the Bank’s Community-Driven Development Global Solutions Group learned of the promise that CLD offers for inspiring inclusive, sustainable solutions that enlist citizens’ engagement and build community-level confidence in strong governance standards.

Moving from macro to micro – dispelling the dread of inexorable global forces and embracing positive citizen-centric action – the CLD leaders leapfrogged Gordon’s macro-level angst to highlight micro-level opportunity.


Stalled productivity, stagnant economy: Chronic stress amid impaired growth

Christopher Colford's picture

Call it “secular stagnation,” or the disappointing “New Mediocre,” or the baffling “New Normal” – or even the back-from-the-brink “contained depression.” Whatever label you put on today’s chronic economic doldrums, it’s clear that a slow-growth stall is afflicting many nation’s economies – and, seven years into a lackluster recovery from the global financial crisis, some fragile economies seem to be lapsing into another slump.

As policymakers struggle to find a plausible prescription for jump-starting growth, a tug-of-war is under way between techno-utopians and techno-dystopians. It’s a struggle between optimists who foresee a world of abundance thanks to innovations like robot-driven industries, and pessimists who anticipate a cash-deprived world where displaced ex-workers have few or no means of earning an income.

To add a bracing dose of academic rigor to the tech-focused tug-of-war, along comes a data-focused realist who adds a welcome if sobering historical perspective to the debate. Robert J. Gordon, a macroeconomist and economic historian at Northwestern University, takes a longue durée perspective of technology’s impact on growth, wealth and incomes.

Gordon’s blunt-spoken viewpoint has caused a sensation since his newest book, “The Rise and Fall of American Growth,” was launched at this winter’s meetings of the American Economic Association. His analysis injects a new urgency into policymakers’ debates about how (or even whether) today’s growth rate can be strengthened.

When Gordon speaks at the World Bank on Thursday, March 31 – at 11 a.m. in J B1-080, as part of the Macrofiscal Seminar Series – economy-watchers can look forward to hearing some ideas that challenge the orthodoxies of recent macroeconomic thinking. His topic – “Secular Stagnation on the Supply Side: Slow Growth in U. S. Productivity and Potential Output” – seems likely to spark some new thinking among techno-utopians and techo-dystopians alike.

To watch Gordon’s speech live via Webex – at 11 a.m. on Thursday, March 31 – click here. To dial in to listen to the audio, dial (in the United States and Canada) 1-650-479-3207, using the passcode 735 669 472. For those telephoning from outside the United States and Canada, the appropriate numbers can be found on this page.

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