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December 2015

What’s next for the Competitive Cities initiative: 'To travel far, let's travel together'

Ceci Sager's picture



“I wish that I had had this [report] when I started. . . . It has some great things that we found out over a long period time 
–  in many cases, through trial and error. And so, when I read it, I said, 'Wow, we are doing these things, but it did take us awhile to buy into these things.' It is going to be very informative to cities around the worlld.” 
– Tracey A. Nichols, Director of Economic Development, City of Cleveland


The World Bank Group launched the Competitive Cities report on December 10 – “Competitive Cities for Jobs and Growth: What, Who and How,” which represents almost two years of research and analysis to put together a reliable, comprehensive and unified body of work. It is aimed primarily to help cities formulate and implement economic development strategies, and it is intended to be used by city leaders  themselves.
 
The report was launched jointly by the senior directors of two Global Practices at the Bank Group: the Trade and Competitiveness and the Social, Urban, Rural and Resilience practices. The roundtable discussion included academics, policymakers, senior World Bank advisors, and representatives from the private sector. The Bank Group's stately Old Board Room was filled to overflowing, and the audience was particularly appreciative of the video animation summarizing the central ideas within the Competitive Cities report. The twitter feed associated with the event (#competitivecities) was inundated with live tweets. Supportive analyses in the news media – for instance, in the Huffington Post by Marcelo Giugale and at CityLab by Richard Florida – focused supportive news coverage on the event.

The launch of the report is much more than a flash in the pan. The report itself is only the start: What follows is the rollout, the active dissemination to regional task teams and city leaders, and the setting-in-motion of the findings of the report, which focuses on sub-national growth and job creation. These are some of the events we have planned:

  • Events in the various World Bank Group regions, to share the general framework and also to customize the findings of relevance to each specific region.  So far, we are considering events in Singapore, Sydney, Dar Es Salaam and potentially cities in the Middle East, North and West Africa, and in the Caribbean. If your city is interested in hosting a regional event, we would be pleased to hear from you.
  • A three-day interactive executive training course on competitive cities, which is aimed at city mayors and economic development advisors to cities.
  • An operational guide to help configure competitive cities into World Bank lending projects and advisory services, including deep dives for regional and country task teams. Let us know if you’re particularly interested in hosting such a training session in your region.

'If I knew that avocados had value, I would plant more of them'

Cecile Fruman's picture



Emilienne Isenady poses while showing off the crops on her land in Lascahobas, Central Plateau, Haiti.

“If I knew that avocados had value, I would plant more of them,” says Emilienne Isenady, a single mother of six in Lascahobas, in the Central Plateau of Haiti.

Emilienne grows and sells avocados to Dominican buyers and to “Madan Saras” (the local name for women brokers who buy and re-sell products in other cities), who will buy the avocados and transport them using the perilous local “tap taps” – trucks converted into public transportation. She will also sell them in the local market in Lascahobas.

Emilienne is a smallholder farmer, but little does she know that she is already part of an avocado local value chain, nor that there is a better avocado Global Value Chain (GVC) out there facing a global shortage.

Emilienne’s is guiding us to see her avocado trees. As we push aside branches, we do not see neatly planted rows of avocado trees but rather a wild two hectares of scattered mango trees, avocado trees, malanga, sweet peas and pineapples. We are accompanied by Marc André Volcy, Farah Edmond and Jean-Berlin Bernard, three “mobile agents” of the Business Support Service team for the Central Plateau Department.

The team is part of a program that the Haitian Ministry of Commerce and Industry has put in place to support entrepreneurs in micro, small and medium-sized enterprises across the country. The program is supported by the World Bank Group’s Business Development and Investment Project (BDI). There are nine other teams just like them in the nine other departments of the country, all working simultaneously on different value-chain reinforcement initiatives (in such sectors as coffee, cocoa, mango, vetiver, honey and apparel).

Marc, Farah and Jean-Berlin live in the Central Plateau, enabling them to support the avocado producers directly, visiting them often and understanding the local political economy. The team has visited about 80 other smallholder farmers like Emilienne in their department, and has invited them to two public meetings and strategic working groups to present key challenges and opportunities for their avocado cluster. The Central Plateau team has carried out the competitive reinforcement initiative of the avocado cluster in their department with training and coaching financed by a grant from the Competitive Industries and Innovation Program (CIIP), through which they have received in-class training and coaching on how to carry out their field projects. 
 

Six things you need to know about crowdfunding in developing countries

Sam Raymond's picture

This post was originally published on “Crowdfund Insider.”

If you are an entrepreneur in emerging markets, you have probably heard a lot about crowdfunding, but have wondered how it could be useful for your early-stage business.

In developed markets, crowdfunding is swelling the ranks of early-stage entrepreneurs and bolstering the pipeline of enterprises that diversify economies and create the majority of jobs. However, for early-stage entrepreneurs in emerging markets, the path toward crowdfunding remains untrod.

Microlending platforms like Kiva are issuing consumer lending finance but cannot provide enough capital to fund the core business operations of a startup – the average loan on Kiva, for example, is $454. Larger amounts of debt or equity are available via online platforms, but these are best suited for more mature companies or projects with an established track record.

What is missing is a normative usage of presale, rewards, or contributions crowdfunding for early-stage companies, as they attempt to move their idea to prototype and on to customer engagement. In societies where e-commerce is underutilized, payment systems are frail, and even the term “crowdfunding” is widely unknown, the lack of established models and best practices is understandable.

Despite these challenges, many African entrepreneurs are paving the way for crowdfunding by experimenting with different online platforms, testing new techniques, and adapting models to developing markets. The new World Bank Group’s study “Crowdfunding in Emerging Markets: Lessons from East African Startups” captured and analyzed what these first crowdfunding adopters have learned through their innovative campaigns in East Africa.

Can China be an innovation powerhouse?

Douglas Zhihua Zeng 曾智华's picture

China has made great strides toward innovation and technology-driven economy in recent years. There are many firms that are emerging as global players in the technology arena, especially in the ICT sector, such as Lenovo, Huawei, ZTE, Tencent and Xiaomi (which has shaken the legendary smart phone makers – Apple and Samsung – through its disruptive innovation). There are even some world-class competitors in the automotive sector, such as BYD and Geely. China has also become one of the few global players in such technologies as high-speed trains and passenger aircraft: China recently won several international bids for high-speed train projects, and on November 2 in Shanghai it demonstrated its first home-grown large passenger jet, the C919.
 
China’s R&D spending had risen to more than 2 percent of GDP by 2013 (see Table 1) and 2.1 percent in 2014 by estimation, which is above the average of the European Union countries, and China’s target is 2.5 percent by 2020. Its patent applications (both for residents and for non-residents) exceeded 825,000 in 2013 and ranked No.1 globally. China’s number of published scientific and technical journal articles exceeds that of Germany, Japan and the UK, and China now publishes about two-thirds as many as the United States. As a latecomer, China has made some remarkable achievements.
 
To strengthen its innovation efforts still further, China has launched the “Made in China 2025” initiative. In its recently published 13th Five-Year Plan, China has positioned “innovation” as one of its key objectives.

 

Can Islamic finance help fund large infrastructure projects in emerging markets?

Zamir Iqbal's picture



Infrastructure needs in developing countries are great and will continue to rise over the next decade. To sustain the projected global GDP growth between 2012 and 2030, US$57 trillion is needed in infrastructure investment, according to McKinsey's estimates.  
 
In emerging markets infrastructure investment needs have been forecast to range between US$14.4 and US$15.7 trillion in emerging markets from 2008 to 2020.
 
Since funding infrastructure projects usually requires a long-term and large investment, emerging markets are struggling how to meet these needs through public investments or even traditional bank funding.
 
Figuring out how to finance investments needed in infrastructure is one of the key issues on the G20 agenda and has also been identified in the Sustainable Development Goals.
 
While private-public partnerships are usually mentioned as one way to bridge this financing gap, using Islamic finance or other asset-backed financial mechanisms to fund long-term development has started to gain traction in recent years.
 
As part of events held around the G20 Summit, the World Bank Group with the Turkish Capital Market Board and Borsa Istanbul organized a conference on “Mobilizing Islamic Finance for Long-Term Investment Financing,” which took place on November 18-19, 2015 in Istanbul.

Job preservation or job creation: can’t we have it both ways?

Simon Bell's picture
Using SME lines of credit and other SME support operations for long-term development or a quick term countercyclical fix?
 
I recently attended an interesting presentation about a truly impressive credit guarantee agency, the Korean Credit Guarantee Agency (KODIT), established 40 years ago with $44 billion in outstanding guarantees and 220,000 SMEs guaranteed annually. A truly impressive institution which has opened up bank lending to more and more SMEs, which otherwise would have gone unfunded and unserved.  As one of the larger Partial Credit Guarantee (PCG) schemes in the world, the Koreans have clearly achieved remarkable results at an impressive scale.
 
The one thing that struck me most, however, was the slide reproduced below. KODIT explicitly uses a guarantee instrument on SME loans as a tool of countercyclical policy. So, when the economy enters a down turn, guarantees are more liberally applied to ensure that SMEs don’t go out of business and adversely impact the generally negative economic scenario. “Job Preservation” becomes more important than “Job Creation.” With 99% of registered firms in Korea being SMEs, and with 87% of Korean employment coming from SMEs,supporting this sector in a down turn is clearly very important.

 

Korea is not unique.  During the early days of the Great Recession in 2008, the Small Business Administration of the United States of America increased SME guarantees in the face of an economic down turn.  Since the summer of 2015, the Chinese government has begun to offer subsidized loans to SMEs to counteract the effects of the Chinese slow down. Countries such as Turkey, Ecuador, Nigeria, Kazakhstan, Myanmar and Egypt are increasingly seeking World Bank support for SME lines of credit, SME guarantee programs, and other forms of SME support. Supporting SMEs is clearly a well-recognized and frequently applied tool of economic policy.
 
Yet our own World Bank guidelines stipulate that SME-support interventions are meant to help achieve longer-term developmental goals – broadening and deepening financial markets so that financial systems can ultimately take on these types of lending without the need for outside intervention. In fact, a 2014 IEG Report on “The Big Business of Small Enterprise” criticized the World Bank, the International Finance Corporation, and MIGA for undertaking SME I, followed by SME II, followed by SME III, followed by SME IV, with no visible increase in the capacity of the underlying financial sector to sustain such lending on its own account, very little lengthening of the tenors of SME lending, and seemingly very little increase in the commercial banking sector’s comfort levels in dealing with a clientele which all too frequently is perceived by private lenders as being unduly risky.
 
It would actually seem, however, that SME Lines of Credit and other forms of SME support, are undertaken for several reasons but within two broad categorizations:
 
Category 1:
  • To help catalyze the market in the development of longer term financing instruments (an output, not an outcome)
  • Support employment generation (which is a prime motivation in the current global environment) or other “SME-related” objectives (such as diversification, innovation, geographic dispersion of economic activities, value chain inclusion, women’s employment, youth employment, etc)
 Category 2:
  • As a tool of countercyclical economic policy.
My strong belief is that many of the SME support operations that the World Bank is being asked to operationalize are related to putting a countercyclical policy in place in the face of an economic down turn.  Most of these governments have not “suddenly found religion” with respect to wishing to promote longer term maturities in their SME lending markets or seeking to promote greater private sector bank risk taking with growing SME portfolios.  They clearly want to have operational interventions in place as soon as possible because they face immediate economic problems.
 
It would appear that SME support mechanisms can be a  legitimate tool of countercyclical economic policy in an economic down turn. However, because speed is generally a prime pre-requisite in such an environment, these types of operations will not necessarily promote the pre-conditions for longer term market development for SME funding, an enhanced appetite for banks to lend to SMEs, or even increased support for “employment-generating” SMEs that may well be the desired target …………. and consequently, the criticism that we are not having a real lasting developmental impact.
 
Maybe the time has come start thinking about SME lending in two distinct ways: 
  • As a tool of countercyclical economic policy (much like fiscal support through a DPL, but directed at the private sector)  and
  • As a more developmental instrument (catalyzing longer term lending markets, developing instruments more attuned to “employment generating” SMEs, supporting a more robust financial infrastructure – including payments system and PCG support schemes, etc).  
Until we come to better grips with these two distinct – and equally important impacts – of SME support operations, we will continue to undervalue the short- to medium-term value of countercyclical SME lending, despite its widespread global use and its potentially hugely important economic impact.
 
 

Extending financial services to women in Bihar yields social and economic benefits

Jennifer Isern's picture


How many bank accounts do you have? One, two or more? For people in developed countries, a bank account is a fact of everyday life. A constant presence. Something that is pivotal to your home, your work and your family. But imagine if you didn’t have one. How would you be paid? How could you pay for your rent or mortgage, your food, utility bills, and so on?

Trade competitiveness in Uruguay

Gonzalo Varela's picture
For a small economy like Uruguay, integration into the global marketplace is one of the most powerful vehicles for growth and development. Participating actively in international trade allows Uruguayan firms to become more productive, by achieving economies of scale and by learning through exposure to international technologies, know-how and ideas. 

How did Uruguayan firms perform, over the last 15 years, in the global marketplace?


Using the Trade Competitiveness Diagnostic Framework – which we presented today to the Uruguayan public and private sector – a World Bank team examined the performance of Uruguayan firms in global markets in terms of export growth, diversification, quality upgrading and survival;. The team presented a number of recommendations to increase integration and to gain from it.

The main findings of
the report reveal the following:

  • Exports have grown fast thanks to favorable external conditions, but also due to the dynamism of the private sector, as well as to sound trade and investment policies.
  • Tailwinds due to high commodity prices helped export growth. Exports in gross and in value-added terms expanded at double-digit rates, and they expanded even faster among primary and resource-based products. The emblematic example is that of soybean exports, which stood at US$1.5 million in 2001 and which climbed to US$1.6 billion in 2014, making Uruguay an increasingly important player in the world market with a share of 3 percent of total exports.
  • But it wasn’t just tailwinds. The private sector was dynamic enough to seize the opportunity of favorable conditions and penetrate 46 new markets between 2000 and 2013. In just one product, beef, exporters gained access to 30 new destinations, and they secured higher prices in top-quality markets on the back of smart entrepreneurship, quality upgrading and a longstanding government strategy of negotiating market access for the sector. In services, for example, modern, knowledge-intensive sectors such as ICT and other business services also grew at double-digit rates, increasing the knowledge content of the export bundle.

Are my bananas green because of market distortions or wrong policies?

Michael J. Goldberg's picture



Green bananas. Saturday morning I head to the market to buy bananas, but I find only green ones at the stand. There is no large banana importer to complain to, no government bureaucrat to sympathize with my need for ripe bananas, and certainly no banana grower to chat with. I have to make an economically rational decision (buy them green, buy them later, or don’t buy at all) and move on to the apples, where the cycle repeats. This is a market imperfection that I understand and have to live with (although it drives me bananas).

But what about when we wear another hat, that of the Bank financial sector project designer? We are used to generating investment projects that fit different market situations, regulatory systems, and political realities. Under tight time constraints, we do what an economist might do – assume there is a market imperfection and brainstorm on the most appropriate effective solution. But a true economist would want evidence of the market imperfection from statistics, recent assessments, etc.
  
So what is a financial sector specialist to do?  The first step is to understand which of the many imperfections represents the binding constraint – the one that blocks government and private sector counterparts from taking the first steps to correct a problem. This is where the economists come in.  

What’s the color of entrepreneurship?

Cecile Fruman's picture

From November 12 to 19, the World Bank Group celebrated Global Entrepreneurship Week (GEW) with a series of events focused on the role of entrepreneurship for development. More than 500 entrepreneurs, academics and practitioners gathered from all over the world to discuss one key question: What does entrepreneurship look like in developing countries?
 
After listening to experts presenting their research and entrepreneurs discussing their inspiring stories, I believe the question has multiple answers. Like the GEW logo — a multicolor compass — entrepreneurship is a spectrum that embraces different realities, from social enterprises and community-led businesses to young startups and multinational firms. 



So what’s the color of entrepreneurship?
 
To aspiring entrepreneurs around Cape Town, South Africa, entrepreneurship probably looks red. Red like the logo of the local RLab, a center founded in 2008 by Marlon Parker — a World Economic Forum Young Global Leader and an alumnus of President Obama's Young African Leaders initiative — to empower local communities through impact investing and social enterprise incubation.
 
Opening the Global Entrepreneurship Forum, Marlon talked about his mission to build “economies of hope.” In his welcoming incubation space, painted in a warm red, unemployed people, students and dropouts can experiment with new technologies, connect with mentors and participate in training programs to learn everything they need to launch a local business. His model incubates new enterprises within the community, with the community and for the community. Marlon has even introduced a local “reward currency”: a credit that can be earned only by doing good actions within the community and that, like real cash, can be spent at the Rlab and in participating stores.
 
But what conditions enable local businesses to reach regional or even global scale? This question was the focus of “From Start-ups to Scale-ups: the Realities of Growth Entrepreneurship,” a seminar organized by the World Bank Group in partnership with the Brookings Institution and the Global Entrepreneurship Research Network.