Many of the World Bank Group’s client countries face a difficult challenge – and the White House recently put this issue at the top of the agenda, too: How can policymakers increase competition to support continued growth of the economy? In a global low-growth environment, developing and advanced economies alike are looking for new ways to boost productivity and innovation. A global panel of Ministers agreed at a recent Spring Meetings event that market competition is pivotal in finding a solution.
When firms collude to fix prices or divide markets, thus harming consumers and reducing competitiveness in their sector and the broader economy, independent competition authorities can fine and therefore deter such illegal conduct. When governments set up rules that reinforce the market power of a dominant firm or that allow such illegal conduct, then competition authorities can rarely demand that those rules be changed – even though the effects on prices, service quality or the availability of products can be just as severe. If champions of competition seek to promote more pro-competition government interventions in markets, they must rely on competition advocacy.
Last Thursday in Singapore, Klaus Tilmes, Director of the Trade and Competitiveness (T&C) Global Practice of the World Bank Group, and Andreas Mundt, Chair of the International Competition Network (ICN), presented awards to the winners of the 2015-2016 Competition Advocacy Contest – a joint WBG and ICN initiative – at the ICN Annual Conference.
A new World Bank Group publication, launched by T&C on April 15, showcases the results of the 2014-2015 Competition Advocacy Contest, sharing the lessons that have been learned about effective advocacy and discussing innovative ways of adapting to new competition challenges. Previous rounds of the contest have shown how the notable impact of competition advocacy can change mindsets.
Our newest publication highlights the tools that competition authorities have developed to overcome the practical challenges, political-economy constraints and emerging trends that affect competition advocacy.
Private Sector Development
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.
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.
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.
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.
“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?
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.
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.
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.
- Income Inequality
- Global Inequality
- global unemployment
- Macroeconomics and Fiscal Management
- Macroeconomics and Economic Growth
- macroeconomic policy
- Macroeconomic Management
- Macroeconomists for the Poor
- Labor and Social Protection
- Public Sector and Governance
- Private Sector Development
- Global Economy
- Financial Sector
Innovation is the Holy Grail of governance practitioners worldwide – but, when it comes to public-sector management, is there truly a “science of delivery”? Politics is “the art of the possible,” and governing often seems to be more a skilled craft than a predictable science – requiring an ad hoc alchemy of persuasion, pressure, guile and gumption.
Yet beyond its operational finesse or its scientific rigor, strong governance also requires something more practical – and perhaps more painstaking: diligent management. Improving government agencies’ performance is a key priority for policymakers, and private-sector-style thinking – especially about delivering cost-effective results, on time and on budget – can make a constructive contribution to public-sector management.
Public-sector leaders must always design finely tailored solutions that suit ever-shifting political moods, but they can also adapt the most deft techniques – many of them tested in the private sector – that emphasize achieving tangible results. With a blend of the private sector's can-do drive and the public sector's focus on accountability, an imaginative crosscurrent of ideas enlivened a recent “deep dive” conference at the World Bank that explored a relatively new management mechanism: the results-focused executive “delivery unit.”
The World Bank Group’s Governance Global Practice (GGP) teamed up with a global nonprofit foundation, the Centre for Public Impact (CPI), to convene an expert group exploring this recent innovation in public-sector management. The gathering – “The Future of Delivery Units: Accomplishments, Challenges and New Directions for Reforms at the Center of Government” – was co-sponsored by the President’s Delivery Unit within the Bank Group.
The forum heard various perspectives from governance practitioners, political theorists and academic scholars, along with both practicing and former civil servants. Much of the conference-goers’ thinking also seemed to have been influenced by private-sector logic. The conference’s pragmatism was reassuring amid this year’s primal-scream spectacle, in all too many countries, of political dysfunction. For many good-government idealists, it’s been alarming to see the tumult in many once-stable, now-volatile developed economies where an advanced capacity for governing had seemed well-established.
Bob Beschel, the Global Lead of the Center of Government Global Solutions Group – part of the World Bank's Governance Global Practice – convenes the conference's opening session. Photo by Lana Wong.
The use of delivery units should be evaluated “in the context of management innovation,” as the conference chairmen – Bob Beschel, the Global Lead of the GGP’s Center of Government Global Solutions Group, and Adrian Brown, the Executive Director of CPI – told the participants. Indeed, such consulting firms as the Boston Consulting Group (which funds CPI) and McKinsey & Company have long aimed to bring private-sector-minded efficiencies to public-sector institutions. Having labored in those vineyards awhile, some years ago, I came to see how creatively cross-pollinating ideas can transfer knowledge about best practices among the public, private, social and academic sectors.
Grenada – Photo by Steve Utterwulghe
Many Caribbean States have long been trapped in a vicious cycle of low growth, high debt and limited fiscal space. The impact of the 2008 financial crisis, as well as recurrent natural disasters, has made the situation even more acute in the region.
To address the structural and policy obstacles to development and growth, a multi-stakeholder dialogue platform on growth in the Caribbean was launched in 2012 by policymakers, the private sector and civil society from 12 states in the region. The Caribbean Growth Forum (CGF) was championed by the states’ prime ministers, and focal points were appointed in the respective Ministries of Finance. The World Bank, acting as the CGF Secretariat, has been behind this initiative from the onset, in collaboration with other regional development banks and various development partners active in the region.
Using a conceptual framework of reform identification, tracking and reporting, CFG’s stakeholders have made 495 reform recommendations so far – 40 percent of them actionable in the three pre-identified thematic areas: investment climate, connectivity and logistics, and productivity and skills. The World Bank in 2015 undertook a stocktaking exercise, which identified the CGF’s positive impacts and the areas of improvement.
The benefits of the CGF are unanimously recognized: the generation and dissemination of knowledge to support the reform implementation in the three thematic areas; support for the prioritization of government reforms; the strengthening of stakeholders’ accountability; the creation of social capital by giving a voice to a range of stakeholders; peer-to-peer exchanges and pressure; and the fostering of a culture of dialogue in the policy reform agenda.
Along with Cecile Fruman, Director of the Trade and Competitiveness Global Practice of the World Bank Group, I was honored to participate and speak at the launch of the Second Phase of the CGF in Belize on March 1 and 2. The objective of the event was twofold: to share and discuss the lessons learned so far, and to have the finance ministers of 12 Caribbean countries endorse a Joint Communiqué.
That communiqué, according to Sophie Sirtaine, the World Bank’s Country Director for the Caribbean, “signals the renewed commitments of these Caribbean nations to accelerate growth enhancing reform implementation, while strengthening public accountability through strengthened public-private dialogue (PPD) mechanisms.”
Achieving gender equality and the economic empowerment of women is both a moral and social imperative — and it's also good business.
A study conducted by the McKinsey Global Institute estimates that, if all countries matched the level of progress toward gender equality of the most advanced country in their region, annual global GDP could increase by up to $12 trillion in 2025.
Over the past two decades, significant progress has been made toward raising living standards and closing the gap between men and women, particularly in health and education. Life expectancy at birth has risen in tandem with reductions in maternal mortality, while differences in access to primary education between boys and girls are diminishing steadily.
These gains — although significant — conceal differences between countries and regions, and are insufficient to ensure equal access to economic opportunities for boys and girls.