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fragile and conflict affected states

Mission to Myanmar: Promoting the Full Development Potential of an Economy in Transition

Cecile Fruman's picture
In Yangon, the urban modernization of Myanmar is well under way | Photo by Stephanie Liu

How do you help a burgeoning democracy like Myanmar with its transition to a market-based economy after 50 years of isolation, poor infrastructure and limited capacity for reform? You do it by  engaging closely with the government, the private sector and development partners, and by providing the full range of data, financing and knowledge available across all sectors of the economy.

As I conclude my first visit to Myanmar, a fragile and conflict-affected country where the World Bank Group started our development engagement just three years ago, I've witnessed first-hand how the WBG can best support such an economy in transition. As Myanmar looks forward to its first free and fair election in over two generations – an event coming up in November – the challenge will be to ensure continued reform momentum during a period of dramatic political change.
Seldom have we faced such dramatic circumstances in a country where our engagement is in such an early stage and where the development potential is so great. A country of 50 million people that went from once being the rice basket of Asia to today having the lowest life expectancy and the second-highest rate of infant and child mortality among ASEAN countries as well as vast untapped farmland, Myanmar provides a once-in-a-lifetime development opportunity. This situation offers a chance for the WBG’s Trade and Competitiveness Global Practice to contribute to the transformation of an economy and society by supporting regulatory reforms, improving trade policy and trade facilitation, helping generate investment and improving the ability of the country to compete in one of the world’s most dynamic regions.
I was privileged during my visit to meet with the Minister and Deputy Minister of Commerce and their senior staff, and to open the Third Session of the Trade Sector Working Group, which the WBG co-chairs with the European Union and the Ministry of Commerce. Surrounded by India, China, Bangladesh, Thailand and Lao PDR – countries that together have about 40 percent of the world’s population – Myanmar has markets at its doorstep that are ready to be tapped. The removal of investment and trade sanctions by the West has also opened significant new opportunities farther afield.

Structured dialogue, value chain and competitiveness: A journey through implementation, from Copenhagen to Kabul

Steve Utterwulghe's picture

Afghanistan. Photo by Steve Utterwulghe.

This latest blog post should start with a mea culpa. Indeed, my 2015 work plan for public-private dialogue (PPD) did start in Dushanbe, Tajikistan, not Copenhagen. However, who can swear that he never tweaked a title a tiny bit to make it catchier?
While Dushanbe hosted the very productive First Regional PPD Forum in the “stans,” the 8th Global PPD Workshop took place in March in the Danish capital. There, “more than 300 representatives from governments, private enterprises, PPD coordination units, investors’ councils, competitiveness partnerships, civil society, business organizations, and various development partners participated in the event. They represented 54 countries and a total of 40 PPD initiatives who joined the event to share their experiences and discuss lessons learned.”
High-powered individuals kick-started the Copenhagen event, including HRH Crown Princess Mary of Denmark, who reiterated that, to make a difference in the world, “it will take partnerships across countries, governments, and between public and private sectors.”
Once the keynote speeches had been delivered, the real work began among the delegates and with the PPD experts. I jumped from impromptu coffee break to coffee break and strategized with the Côte d’Ivoire delegation on how to prepare for the National Day of Partnership/Dialogue in Abidjan; discussed ways to better involve the private sector in Morocco; debriefed with the Guinea Minister of Industry, SMEs and Private Sector Promotion on how the PPD structure that we helped put in place is strengthening the local value chain for extractive industries (see below); and moderated an engaging session on public-private dialogue in fragile states and conflict-affected countries (FCS), which provided great insights as I prepared to fly out on PPD missions to Somalia and Afghanistan.
Aside from the buzz of international gatherings, what really matters for the delegates, from both governments and the private sector, is to get inspired and bring back home ideas that can be adapted locally and successfully implemented. Public-private dialogue is an art defined by some fundamental core principles that can be adjusted according to specific needs and environments.
As a reminder, PPD refers to the structured interaction between the public and private sectors to promote the right conditions for private sector development. Its ultimate function is to contribute to a prosperous economy by expanding market opportunities and enabling private initiative. This is also very much the mission of the new World Bank Group Global Practice on Trade & Competitiveness (T&C). Its Senior Director, Anabel Gonzales, wrote in one of her blog posts on Trade and Development in Africa that fostering competitiveness and strengthening supply chains is a key to development and an integral part of T&C’s offering.
As I reflected on the links between structured multi-stakeholder dialogue, competitiveness and supply chains, I remembered a Harvard Business Review article written by Michael Porter and Mark Kramer, entitled Strategy and Society: The Link between Competitive Advantage and Corporate Social Responsibility.
What particularly caught my attention at the time was the theory on interdependence between companies and society that the Harvard professors put forward. They argued that this interdependence takes two forms: the social impact that a company’s activities has on society, or “inside-out linkages,” and the social influences on the company’s competitiveness, or “outside-in linkages.”

'It’s the Trust, Stupid!' The Influence of Non-Quantifiable Factors on Policymaking

Steve Utterwulghe's picture

Should trust be something that policymakers need to worry about? I started reflecting on this question after I came across the 2015 Edelman Trust Barometer. It suggests that 80% of the people surveyed in 27 markets distrust governments, business or both (see figure 1).

A staggering number, to say the least. The year 2014 did not spare us from economic, geopolitical and environment turmoil. Nonetheless, the trend over the last few years has been a growing distrust in our leadership, despite the fact that progress has been made in the three main pillars of trust: integrity, transparency and engagement. More needs to be done, it seems.

Figure1. Trust in business and government, 2015

As Ralph Waldo Emerson, the American essayist and poet, wrote: “Our distrust is very expensive.” The lack of trust in our government affects policies and reforms, and thus damages the overall economic environment. Investors will lack confidence and shy away. Growth will stagnate, sustainable jobs won’t be created, and trust in government will erode even further. A vicious circle is being created.

Professor Dennis A. Rondinelli, lately of Duke University, argues: “What are called 'market failures' are really policy failures. The problems result from either the unwillingness or inability of governments to enact and implement policies that foster and support effective market systems.” Distrust thus influences policymakers in multiple ways: They will either adopt bad policies, or overregulate. A study published in The Quarterly Journal of Economics shows that “government regulation is strongly negatively correlated with measures of trust.”  “Distrust creates public demand for regulation, whereas regulation in turn discourages formation of trust. . . . Individuals in low-trust countries want more government intervention even though they know the government is corrupt” (see figure 2).

Figure 2. Distrust and regulation of entry. Regulation is measured by the (ln)-number of procedures to open a firm.
Sources: World Values Survey and Djankov et al. (2002).

The evaporation of trust in government institutions requires that governments and development agencies rebuild trusted institutions. However, it also behooves all of “society’s stakeholders” to rebuild trust among themselves and “engage.”

Integrity and transparency are two of the pillars of trust that have received a lot of attention during the past decade. Indeed, tackling corruption and ensuring transparency have been at the top of the institutional and corporate development agenda. The third pillar, engagement, has been more rhetorical or grossly underestimated.

A prerequisite for inclusive and responsive policymaking is that citizens use their voice and engage constructively with government institutions. As we have seen, increasing social and political trust helps market economies function more effectively. In turn, sound economic policies foster social and political trust. In recent years, the practice of structured public-private dialogue (PPD) has helped the private sector and other stakeholders engage in an inclusive and transparent way with governments. PPD mechanisms have resulted in better identification, design and implementation of good regulations and policy reforms intended to create an improved investment climate and increase economic growth. As a result, this process has built mutual trust between institutions and business.

Confidence-building has been most critical in post-conflict and conflict-affected states where deep mistrust among stakeholders is prevalent. That topic will be discussed in greater depth at our 2015 Fragility Forum’s session on public-private and multi-stakeholder dialogue, coming up on February 13. Foreshadowing the Fragility Forum, a panel discussion in Preston Auditorium on Monday, February 2 – featuring, among others, Sarah Chayes of the Carnegie Endowment for International Peace, who is the author of  “Thieves of State: Why Corruption Threatens Global Security” – will focus on "Corruption: A Driver of Conflict."
In an age of distrust, this type of policy reform – through multi-stakeholder engagement – is not an obvious exercise. The economist Albert Hirschman claims that “moving from public to private involvements is very easy because any single individual can do it alone. Moving from private to public involvements is far harder because we first have to mobilize a lot of people to construct the public sphere.” But the increase of PPD platforms across the world  the WBG Trade & Competitiveness’ Global PPD Team currently supports 47 PPD projects worldwide  suggests that there is an appetite for engagement among citizens, business and governments alike.

Trust can be slowly restored by, among other things, designing adequate interventions such as PPD mechanisms. By their inherent iterative process of discovery, collaborative identification of issues and joint problem-solving, PPDs can activate favorable mental models of stakeholders. According to the 2015 World Development Report on "Mind, Society and Behavior," these “mental models can make people better off.” I would argue that these mental models drawn from their societies and shared histories can help build trust as well.
Trust matters for policymakers. Ultimately, it matters for all citizens. Designing interventions and offering a safe space where stakeholders can engage with governments in an inclusive and transparent fashion will go a long way toward restoring that valuable trust.

Fostering Private Sector Development in Fragile States: A Piece of Cake?

Steve Utterwulghe's picture
Private sector development (PSD) plays a crucial role in post-conflict economic development and poverty alleviation. Fragile states, however, face major challenges, such as difficult access to finance, power and markets; poor infrastructure; high levels of corruption; and a lack of transparency in the regulatory environment. 

The private sector has demonstrated its resilience in the face of conflict and fragility, operating at the informal level and delivering services that are traditionally the mandate of public institutions. However, in post-conflict situations, PSD can have predatory aspects, thriving on the institutional and regulatory vacuum that prevails. The private sector will need to create 90 percent of jobs worldwide to meet the international community’s antipoverty goals, so pro-poor and pro-growth strategies need to focus on strengthening the positive aspects of PSD, even while tackling its negative aspects.

Focusing on fragile nations

With a rapidly increasing share of the world's poor now living in countries and territories classified as fragile or conflict-affected states, improving the conditions for private sector development can be one way for these countries to generate economic growth. This is an emerging priority of the Bank, and was a focus of much of the Investment Climate department’s work last year.