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A good diagnosis for the city economy?

Dmitry Sivaev's picture



One walks into a doctor’s office knowing what hurts but with little knowledge of what should be done to fix it. Identifying proper treatment requires sophisticated tests, participation of experts and, often, second opinions.

Cities, arguably, are as complicated as human bodies. Our knowledge of diagnosing cities, however, is far less advanced than in human biology and medicine.  Most mayors know very clearly what they want for their cities – jobs, economic growth, high incomes and a good quality of life for the people. But it is very difficult to identify what prevents private-sector firms, the agents that create jobs and provide incomes, from growing and delivering these benefits to a city. And we have no X-ray machine to aid in the effort.
 
As a part of the World Bank Group's Competitive Cities project, we thought hard about ways to help cities identify the roots of their problems and design interventions to address them. We set out on a journey to put together methodologies and guidelines for cities that want to figure out what they can do to help firms thrive and create jobs.  We learned from our own experience of working with cities, and from other urban practitioners. We reviewed many methodological and appraisal materials, and we trial-tested our ideas.

So what have we achieved? We certainly didn’t invent an X-ray machine, but we have developed “Growth Pathways” – a methodology and a decision-support system to help guide cities and practitioners through diagnostic exercises.

Financial inclusion in Asia – time for disruption?

Nataliya Mylenko's picture



More than half of the world’s population lives in Asia and its robust growth is supporting the world economy.  After weathering well the 2008 crisis Asia is now in the spotlight with currencies depreciating and capital markets in retreat.  One widely voiced concern is rapid expansion of credit in the past decade fueled by abundant liquidity.  Globally, and in Asia, regulatory response to the 2008 crisis has been to strengthen financial regulation and de-risk financial intermediation.  Yet the reality of credit markets in most Asian economies is quite different from that in high income economies.  While domestic credit by financial sector represented on average over 100% of GDP for high income OECD countries, emerging Asia’s average in 2014 stood at 60%. The differences across countries are substantial in this diverse region, but in two thirds of Asian economies domestic credit is less than 60% of GDP.  The reality for most economies in Asia is that of limited and often inefficient financial markets which do not serve fully their growth needs. Low level of financial inclusion is a major contributing factor and a major challenge.

Newest private participation in infrastructure update shows growth and challenges

Clive Harris's picture



In 2013, investment commitments to infrastructure projects with private participation declined by 24 percent from the previous year.  It should be welcome news that the first half of 2014 (H1) data – just released from the World Bank Group’s Private Participation in Infrastructure (PPI) database, covering energy, water and sanitation and transport – shows a 23 percent increase compared to the first half of 2013, with total investments reaching US$51.2 billion.

closer look shows, however, that this growth is largely due to commitments in Latin America and the Caribbean, and more specifically in Brazil. In fact, without Brazil, total private infrastructure investment falls to $21.9 billion – 32 percent lower than the first half of 2013. During H1, Brazil dominated the investment landscape, commanding $29.2 billion, or 57 percent of the global total.

Four out of six regions reported declining investment levels: East Asia and the Pacific, South Asia, Africa, and the Middle East. Fewer projects precipitated the decrease in many cases. Specifically, India has experienced rapidly falling investment, with only $3.6 billion in H1, compared to a peak of $23.8 billion in H1 of 2012. That amount was still enough to keep India in the top five countries for private infrastructure investment. In order of significance, those countries are:  Brazil, Turkey, Mexico, India, and China.

Sector investments were paced by transport and energy, which together accounted for nearly all private infrastructure projects that were collected in this update. The energy sector captured high investment levels primarily due to renewable energy projects, which totaled 59 percent of overall energy investments, and it is poised to continue growth due to its increasing role in global energy generation.

The energy sector also had the biggest number of new projects (70), followed by transport (28), then water and sewerage (12). However, transport claimed the greatest overall investment, at $36 billion, or 71 percent of the global total.

While we need to see what the data for the second half of 2014 show, what we have to date suggests that infrastructure gaps may continue to grow as the private sector contributes less. It also suggests that, in many emerging-market economies, there is much work to be done to bring projects to the market that will attract private investment and represent a good deal for the governments concerned. 
 

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?

Why is China ahead of India? A fascinating analysis by Amartya Sen

Sebastian James's picture


Investments in education could spur economic growth in India (Credit: World Bank)

I had the wonderful opportunity to listen to my former professor Amartya Sen at the World Bank who attempted to answer this very pertinent question in the minds of many today. The fundamental question at the core is why is it that while we rate democracy as the better form of government, it is single party ruled China that has been more successful at bringing more people out of poverty than democratic India? The implications for India are clear; investing in education and health for all its citizens is the best solution for long term growth.

Can informal health entrepreneurs help increase access to health services in rural areas?

Jorge Coarasa's picture


New approaches to medical care can improve health outcomes (Credit: World Bank, Flickr)

In many poor countries, a large proportion of health services is provided by the private sector, including services to the poor. However, the private sector is highly fragmented and the quality of services varies widely. Private health markets consist of providers with very diverse levels of qualification, ranging from formally trained doctors with medical degrees to informal practitioners without any formal medical training. According to Jishnu Das, in rural Madhya Pradesh— one of the poorest states in India, households can access on average 7.5 private providers, 0.6 public providers and 3.04 public paramedical staff. Of those identified as doctors, 65% had no formal medical training and of every 100 visits to healthcare providers, eight were to the public sector and 70 to untrained private sector providers.

Innovating to get things done: Lessons from an industrial park program in India

Yannick Saleman's picture


Successful industrial parks can drive economic competitiveness  (Credit: World Bank, Flickr)

Why do so many industrial park programs fail? They are popular across the developing world, inspired perhaps by China, where they are widely used as a policy tool and where their products are impressive to the visitor: functional parks with many firms and bustling activity. But horror stories abound, even in China, of empty parks, subsidized land speculation and tax erosion, and often no parks at all. This has not dampened enthusiasm, however. The theory is simply too seductive. By providing high-quality, shared infrastructure to firms in specific areas, industrial parks are meant to create pockets of competitiveness that eventually spill over onto the rest of the economy. For capacity-constrained governments, they have the further appeal of focus.

Financial Inclusion: Is Improved Borrower Identification the Silver Bullet?

Martin Kanz's picture

Will improved identification accelerate financial inclusion? ( Credit: Kkalyan, Flickr Creative Commons)

Wherever individuals are excluded from formal financial services the source of the problem is usually a lack of information. Without reliable information about a borrower’s identity or credit history, lenders will compensate for their inability to evaluate risk by raising collateral requirements, charging higher interest rates, or by refusing to lend to certain borrower groups altogether. This leads to financial exclusion, even among otherwise creditworthy borrowers. Technologies that reduce asymmetric information between borrowers and lenders are therefore some of the most powerful tools to reduce financial exclusion. In recent years, much progress has been made to improve credit reporting institutions around the world. But in many countries the challenge is much more basic: much of the world’s population lacks even the most basic identity proof. To address this problem, many countries have experimented with innovative solutions for improved personal identification.

Whether weather….and other issues in indexed insurance

This post is part of our Closing the Gap: Financial Inclusion blog series, which shares the views of selected experts and practitioners on different financial inclusion topics.

Crop insurance can improve the lives of farmers, who make up the majority of the world's poor. (Credit: Mukul Soni, Flickr Creative Commons)

How do you insure hundreds of millions of small farmers spread over many developing countries? There is no easy answer. Individual insurance would entail assessing crop yields in millions of farms within the short harvest windows – a virtually impossible task. And even if this were possible, costs would be prohibitive and data quality, a significant issue.

Yet the importance of finding a solution cannot be underestimated. First, farmers make up the majority of the world’s poor. With high dependence on rain-fed cultivation, agriculture is risky. Mitigation of those risks is critical to stabilizing the income of poor farmers. Otherwise, a crop failure could erode savings, lead to inability to service crop loans, push farmers into a vicious debt trap as they are forced to borrow from moneylenders and in extreme cases, lead to starvation or even worse.

The India Paradox: Promoting Competitive Industries in a High-Growth Country

Ivan Rossignol's picture

India’s economic growth rate in the past decade has been nothing short of spectacular.  With its GDP growth around 7 to 9 percent per year, India is the second-fastest-growing large economy in the world.  However, the country’s manufacturing sector accounts for a dismal 17 percent of its employment opportunities, as compared to 60 percent in agriculture and 23 percent in services.[1]This summer, the World Bank’s Indian Visiting Scholars Program* invited two leading academics from Harvard University to visit India and to articulate potential pathways to sustain the country’s growth trajectory. These 2 scholars are Ricardo Hausmann, Professor of Economic Development at the John F. Kennedy School of Government and Director of Harvard’s Center of International Development and Dani Rodrik, Professor of International Political Economy at the Kennedy School. While there, they interacted with the private sector and key policymakers, including senior officials of the Department of Industrial Policy and Promotion, the Planning Commission, and the Ministry of Finance.