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Social Development

PPPAmericas 2015: Taking public-private partnerships to the next level

David Bloomgarden's picture

The Latin America and the Caribbean region is crying out for infrastructure improvements. An investment estimated at 5 percent of the region’s GDP — or US$250 billion per year — is required to develop projects that are fundamental for economic development. This includes not only improving highways, ports and bridges, but also building hospitals and creating better transport, public transit and other mobility solutions for smarter cities. Rising demand for infrastructure also is prompting countries to redouble efforts to attract greater private investment

At the Multilateral Investment Fund (MIF), as at the World Bank Group, we believe that public-private partnerships (PPPs) can help governments fill this infrastructure gap. However, the projects must be implemented effectively and efficiently to achieve social and economic objectives.

Governments in the Latin America and the Caribbean region not only lack financing to address the infrastructure gap, but also face challenges in selecting the appropriate large infrastructure projects, planning the projects, managing and maintaining infrastructure assets — and gaining public support for private investment in public infrastructure. 

However, PPPs are gaining ground in Latin America and the Caribbean. Beyond the larger economies of Brazil, Colombia and Mexico, assistance from the MIF and the Inter-American Development Bank (IDB) has enabled countries such as Paraguay to develop laws that pave the way for PPP projects. Just this week, Paraguay announced its first such project, which involves an investment of US$350 million to improve and build more than 150 kilometers of roads. 

PPPs have been moving beyond classic interventions in public infrastructure, which have typically included roads, railways, power generation, and water- and waste-treatment facilities. The next wave of PPPs increasingly involves and provides social infrastructure: schools, hospitals and health services. In Brazil, IFC, the private sector arm of the World Bank Group, helped create the Hospital do Subúrbio, the country’s first PPP in health, which has dramatically improved emergency hospital services for one million people in the capital of the state of Bahia.

'Understand clients': The major theme from a World Bank forum on microcredit

Erin Scronce's picture



The conference panel of leading scholars and practitioners on microcredit: From left to right: Esther Duflo, Kate McKee, Lindsay Wallace, Carol Caruso, and Peer Stein.
Photo credit: Michael Rizzo.

On Friday, February 27, researchers, policymakers, investors and practitioners joined forces to move forward in the dialogue around microcredit’s impact on the lives of the poor. Many themes emerged from the day, but perhaps the most salient came from Dean Karlan, who summed things up in 2 words: “Understand clients.”



The Evidence

The conference began with six presentations from researchers Orazio Attanasio, Abhijit Banerjee, Jaikishan Desai, Esther Duflo, Dean Karlan and Costas Meghir, who completed randomized control trials (RCTs) in six countries examining the impact of microcredit. Lindsay Wallace, of the MasterCard Foundation, noted, “These studies may not be new, but they are incredibly important.” While specific findings varied from country to country, the studies confirmed with evidence what many in the field already assumed: that, while microcredit can be good for some, it is no magic bullet for tackling poverty.



 

The Ebenezer Scrooge Economy: The Dickensian Divide Between Concentrated Wealth and Intensifying Poverty

Christopher Colford's picture



Source: Branko Milanovic

If you thought the wealth gap was vast between the miser Ebenezer Scrooge and the oppressed Bob Cratchit in “A Christmas Carol,” then lend a Christmastime thought for the desperate Dickensian divide that’s now afflicting the global economy.

The biggest economic-policy issue of 2014 has certainly been the outpouring of alarm about the chronically intensifying divide between wealth and poverty – an uproar that has had a transformational effect on the worldwide debate on economic policy. As a seminar at the Center for Global Development recently discussed, the precise statistics on inequality (and the perception of inequality) are subtle, with many nuances of measurement (whether data should be derived, for example, from tax-return filings or from household surveys). Yet this year’s irrefutable interpretation among economists and business leaders has been driven by a landmark of economic scholarship: the bombshell book “Capital in the Twenty-First Century” by Thomas Piketty. “Capital” has forced economists, policymakers and scholars to reconsider the inexorable trends that are driving the modern-day economy toward an ever-more-intense concentration of capital in fewer and fewer hands.

No wonder Piketty’s “Capital” was hailed as the Financial Times/McKinsey “Business Book of the Year.” Piketty’s analysis has fundamentally changed the parameters of the public-policy debate, and many of its ideas challenge conventional economic theory.

To explore the implications of the alarming trends in income and wealth inequality, there’s no analyst more insightful than Branko Milanovic, the former World Bank economist who is now a scholar at the LIS Center (working on the authoritative Luxembourg Income Study) at the City University of New York. Milanovic has justly won acclaim for his work, “The Haves and the Have-Nots,” which pioneered the territory now being explored by Piketty.

Confirming the trends that Piketty identified in “Capital” – and taking those insights one significant step further, to measure the wealth gaps both within countries and between countries – Milanovic recently led a compelling CGD seminar on “Winners and Losers of Globalization: Political Implications of Inequality.”

The seminar’s sobering conclusion: If you think the wealth-and-incomes gap is painful now, just wait a decade or two. If allowed to go unattended, the widening economic divide will soon become a dangerous social chasm. That data-driven projection is leading many analysts to dread that inequality (whether between countries or within the same country) threatens topose a stark challenge to social stability, and even to the survival of democracy.

The breakthtaking “a-ha!” moment of Milanovic’s CGD presentation was the chart (see the illustration, above) – praised as "the Chart of the Century" by seminar chairman Michael Clemens of CGD and discussant Laurence Chandy of the Brookings Institution – that plotted-out the pattern of how globalization has exerted relentless downward pressure on the incomes of the global upper-middle class, which roughly corresponds to the Western lower-middle class.

Globalization has helped promote the prosperity of skilled workers in developing nations, Milanovic explained, with the dramatic surge of China’s economy being the greatest driver of global “convergence.” Yet globalization has had an undeniable downward effect on the wealth and incomes of low- and medium-skilled workers in developed, industrialized nations. That certainly helps explain the angry mood among voters in Western Europe and North America, whose overall incomes and wealth have been stagnating for perhaps 40 years.

At the same time – reinforcing the significance of Piketty’s iconic formula that r>g (that the returns on capital are destined to be greater than overall economic growth) – a vast proportion of the world’s wealth has been concentrated in just the very top echelons of society. Milanovic’s meticulous data (see the illustration, below) confirm the extreme concentration of global absolute gains in income, from 1988 to 2008, in the top 5 percent of the world’s income distribution. Rigorous empirical evidence from multiple sources indeed confirms that most of the global gains in wealth have accrued to the already-vastly-wealthy top One Percent. The data on increasing socioeconomic stratification are, by now, so well-established that only the predictable claque of free-market absolutists and dogmatic denierscling (with increasing desperation) to the notion that the inequality gap is merely a myth.




Source: Branko Milanovic

Reinforcing Milanovic’s analysis, yet another well-documented study – this time, by the OECD– asserted this month that economic inequality is intensifying within the world’s developed nations. That within-country trend accompanies the yawning inequality gap between developed and developing economies. The OECD thus joined the chorus that includes the World Bank Group, the International Monetary Fund, the United Nations’ Department of Economic and Social Affairs and the U.S. Federal Reserve System in sounding the alarm about the way that income and wealth disparities are becoming socially explosive. Even on Wall Street, many pragmatists are warning with increasing urgency that “too much inequality can undermine growth.”

Economic inequality – both the perception and the reality of the egregious global gap – has surely been the key economic theme of 2014, and Milanovic’s CGD presentation capped the year with what the seminar-goers recognized as authoritative data distilled into “the Chart of the Century.” Milanovic thus echoed warnings by National Economic Council chairman Jason Furman and Canadian Member of Parliament Chrystia Freeland (both of whom have led recent World Bank seminars), who cautioned Washington policymakers about the potential dangers of runaway inequality.


Energized by Milanovic’s latest calculations and analysis, scholars and development practitioners at the World Bank Group and beyond should approach 2015 with a renewed commitment to building prosperity that is truly shared – and that avoids the potential social explosion that might await many economies if runaway inequality is allowed to continue unchecked.



 

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.

Drifting Toward Plutocracy: Inexorable Concentration of Capital Undermines the Drive for 'Shared Prosperity'

Christopher Colford's picture

Like seismic waves rippling outward after a tectonic shift, reverberations are roiling the economic-policy landscape after the U.S. launch of the groundbreaking new analysis by Thomas Piketty, the scholar from the Paris School of Economics whose landmark tome – “Capital in the Twenty-First Century” – has newly jolted the economics profession.

Any Washingtonian or World Bank Group staffer who somehow missed the news of Piketty’s celebrated series of speeches and seminars last week – in Washington, New York and Boston – received an unmistakable signal this week about what an important intellectual breakthrough Piketty has achieved. President Jim Yong Kim on Tuesday cited Piketty while putting the issue of economic inequality at the top of his list of priorities during his review of the Spring Meetings of the Bank and the International Monetary Fund. Noting that he was already about halfway through reading Piketty’s “Capital,” President Kim sent a clear message that the skewed global distribution of wealth, as analyzed by Piketty and emphasized by many officials at the Bank and Fund's semiannual conference, should be top-of-mind for policy-watchers at the Bank and beyond – indeed, at every institution that hopes to promote shared prosperity.

Piketty’s scholarship is now receiving widespread acclaim as a landmark in economic analysis, and is being recognized both for its “exhaustive fact-based research” and its sweeping historical perspective. More of a patient dissection of hard data than a political roadmap, Piketty’s book has quickly become the subject of multiple praiseworthy reviews, notably in the New York Times and the Financial Times. One usually level-headed Bloomberg View analyst, recoiling from the “rapturous reception” accorded to the book, may have gone slightly overboard this week in asserting that Piketty's insights had been greeted by American liberals with “erotic intensity.”

Predictably, Piketty's book has also quickly become the target – “Piketty Revives [Karl] Marx,” blared a Wall Street Journal headline; “Marx Rises Again,” warned the New York Times’ lonely conservative scold – of the whack-a-mole ideological purists in laissez-faire Op-Ed columns, who forever seem tempted to equate modern-day liberalism with long-gone Leninism. Eager to publish denunciations of any idea, however modest, that might justify (heaven forfend) tax increases on stratospheric income-earners and the top-fraction-of-the-One Percent, the free-market fundamentalists on the Wall Street Journal’s editorial board – unabashed cheerleaders for plutocracy – have opened up one of their trademark barrages via their Op-Ed columns (“This book is less a work of economic analysis than a bizarre ideological screed”; “The professor ought to read ‘Animal Farm’ and ‘Darkness at Noon’ ”). The Journal's jihad clearly aims to demean or discredit anyone who might flirt with such Piketty-style notions as restoring greater progressivity to the tax code. (Egad: Progressive taxation? Next stop: Bolshevism.)

Knowledge-Sharing Boosts Development Know-How, as Practitioners and Policymakers Meet in Mombasa

Qursum Qasim's picture

Karibu Mombasa!

With those words, the World Bank Group’s network on Financial and Private Sector Development (FPD) this week kicked off a major knowledge and learning conference on development in Mombasa, Kenya. More than 250 participants – private-sector innovators, government policymakers and development practitioners from throughout the Africa region as well as from the Bank Group’s headquarters in Washington – came together to share ideas about cutting-edge innovations in delivering services; to brainstorm with colleagues on development strategy for Africa; and to consider new tactics to help meet the practical, everyday needs of Africans.

Delivering strong value for the Bank Group’s client countries was the theme of Klaus Tilmes, the network’s Acting Vice President, as the group envisioned the impending FPD transition into two new Global Practices: Trade & Competitiveness and Finance & Markets. Inclusive growth and inclusive finance – which are vital elements in achieving the Bank Group’s mission of eliminating extreme poverty and building shared prosperity – are the twin and complementary themes through which the two new practices will aim to help their clients meet the development challenge.

Promoting inclusive growth and creating jobs – as engines of growth, as key areas of cooperation between the public and private sectors, and as the backbone of the Bank Group’s approach to promoting a world free of poverty – was the conference’s first-day theme. In this context, youth and female unemployment are priority issues for Kenya and for other African countries – from the perspective of equity, certainly, but also from the perspective of social cohesion.

Partager les expériences pour renforcer l'égalité hommes-femmes en Afrique subsaharienne

Paula Tavares's picture



Le 27 Février, un atelier régional de haut niveau a débuté à Lomé (Togo), avec la participation des ministres en charge de la promotion de la femme et des représentants de 11 pays d'Afrique de l'Ouest et Centrale. Le thème principal de l’atelier était le rapport du Groupe de la Banque mondiale, « Les Femmes, l’Entreprise et le Droit 2014 : Lever les obstacles au renforcement de l’égalité hommes-femmes ». Un dîner de bienvenue précédant l'ouverture officielle de l'événement a révélé le dynamisme des ministres participants - toutes des femmes -, de même que les réalités et enjeux communs à leurs nations. La plupart se réunissaient pour la première fois et cette occasion unique a permis le partage des expériences et des points de vue sur les lois, les normes culturelles et les rôles traditionnels au sein de la famille.

Les discours d'ouverture de l'atelier reflètent bien l'importance de l'égalité hommes-femmes pour la région. En accueillant l'événement, Monsieur Hervé Assah, Représentant Résident de la Banque mondiale au Togo, a noté que : « Sous-investir dans le capital humain que constituent les femmes est un véritable frein à la réduction de la pauvreté et limite considérablement les perspectives de développement sur le plan économique et social ». Ces préoccupations ont été reprises par la Ministre de l'Action Sociale, de la Promotion de la Femme et de l'Alphabétisation du Togo, Mme Dédé Ahoéfa Ekoué, qui a souligné l'importance de la participation des femmes dans la société et dans l'économie, à la fois au Togo et dans le monde. Le ton était donc donné pour cet événement de deux jours, qui visait à la fois à mettre en évidence les récentes réformes adoptées par les pays de la région et à promouvoir le partage d'expériences, les défis et les bonnes pratiques entre les participants pour promouvoir l'inclusion économique des femmes.

Financial Inclusion Up Close in Rwanda

Douglas Randall's picture

You don’t have to spend very long in Rwanda before you start to be impressed by the financial inclusion landscape in this country – not only by the progress made over the past several years, but by the scale of ambition for the rest of this decade and beyond.

The government has set a target of 90 percent financial inclusion by 2020 and the evidence of progress toward this goal is everywhere: Advertisements for mobile-money products are painted and plastered onto almost every available surface and, if you know what to look for, it doesn’t take long to spot an Umurenge Savings and Credit Cooperative (Umurenge SACCO) – Rwanda’s signature financial inclusion initiative.

Six years ago, the 2008 FinScope survey found that that 47 percent of Rwandan adults used some type of financial product or service, but just 21 percent were participating in the formal financial sector, which was at the time made up mostly of banks but which also included a handful of microfinance institutions and SACCOs.

Largely in response to these figures – and in particular to the large urban/rural divide illustrated by the data – and the government set out to establish a SACCO in each of the country’s 416 umurenges, or sectors. The Umurenge SACCO was born.

Sharing Experiences and Insights to Enhance Gender Equality in Sub-Saharan Africa

Paula Tavares's picture



On February 27, a high-level regional workshop kicked off in Lomé, Togo, with the participation of Ministers of gender affairs and officials from 11 economies from West and Central Africa focusing on the World Bank Group’s Women, Business and the Law 2014: Removing Restrictions to Enhance Gender Equality report. A welcome dinner prior to the official opening of the event revealed the dynamic nature of gender affairs Ministers – all women – and the common realities and issues facing their nations. Most were meeting for the first time in a unique experience that enabled sharing stories and views about laws, cultural norms and traditional roles within the family in prelude to the official discussions.
 
The opening remarks at the workshop reflected well the importance of gender equality for the region. In welcoming the event, Mr. Hervé Assah, the World Bank's Country Manager for Togo, noted that “underinvesting in the human capital of women is a real obstacle to reducing poverty and considerably limits the prospects for economic and social development.” Those concerns were echoed by the Minister of Social Action and Women and Literacy Promotion in Togo, Mrs. Dédé Ahoéfa Ekoué, who highlighted the importance of women’s participation in society and the economy, both in Togo and worldwide. The tone was thus set for this two-day event, which aimed at both highlighting recent reforms enacted by countries in the region and promoting the sharing of experiences, challenges and good practices among the participants in promoting women’s economic inclusion.

There is certainly much to highlight and share over these two days and beyond. Over the past two years, several Sub-Saharan African economies passed reforms promoting gender parity and encouraging women’s economic participation. For example, Togo reformed its Family Code in 2012, now allowing both spouses to choose the family domicile and object to each other’s careers if deemed not to be the family’s interests. Côte d’Ivoire equalized the same rights for women and men, and also eliminated provisions granting tax benefits only to men for being the head of household. Furthermore, Mali enacted a law allowing both spouses to pursue their business and professional activities and a succession law equalizing inheritance between husbands and wives. While the pace of reform has been accelerating in the region, it is not a recent phenomenon. In fact, Sub-Saharan Africa is the region that has reformed the most over the past 50 years: Restrictions on women’s property rights and their ability to make legal decisions were reduced by more than half from 1960 to 2010.

Treasure-Hunting for Women Entrepreneurs

Qursum Qasim's picture



Pick any country in the developing world.

Say, Pakistan.

Where are the women entrepreneurs in Pakistan?

They start and manage digital-content creation firms serving international clients. They are sole proprietors of construction businesses bidding for government projects. They supervise tailors and embroiderers in windowless storage rooms that double as stitching units. They export high-end gems and jewelry around the world.

Women entrepreneurs in Pakistan lead cutting-edge, innovative businesses – but there are far too few of them. The recent Global Entrepreneurship Monitor report finds that only 1 percent of Pakistani women are engaged in entrepreneurship – the lowest proportion in the world.

Pakistan is not alone in its dismal ratio of growth-oriented (or indeed any kind of) women entrepreneurs. Even in the developed Asian economies of Korea and Japan, only about 2 percent of women are entrepreneurs. Sub-Saharan Africa does much better in this regard, with 27 percent of women, on average, engaged in entrepreneurship -- but they are mostly involved in low-productivity sectors of the economy.

Women entrepreneurs, in Pakistan and globally, have narrow networks of friends and family who provide them with some initial capital to start their small businesses, with little expectation of further financial support. Their export customers are located wherever they have extended family. And they rarely feature in local chambers of commerce activities.

Banks are often reluctant to extend lines of credit to, provide working capital to or lend to women-led enterprises. This makes it difficult for these enterprises to pursue growth. Perhaps this is why the average growth projections for women-led enterprises are seven to nine percentage points below those for their male counterparts.

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