The historic agreement reached in Paris at the 21st Conference of the Parties (COP21) last December sets out an ambitious plan for signatory countries to achieve specific targets for reduced greenhouse-gas (GHG) emissions. The Paris Agreement includes significant financial commitments and the establishment of structures and mechanisms by which countries will design and implement viable policies to meet agreed-upon goals.
COP21’s major message is one of collaboration: The Paris Agreement unites 177 nations in a single agreement to tackle climate change. Governments set the goal at COP21, but they will need action by the private sector to meet it. One cannot operate without the other.
Industries, which are responsible for 21 percent of direct GHGs worldwide, long resisted the idea of going green, fearing high costs. However, dramatic recent decreases in the cost of climate-friendly technologies, as well as the introduction of carbon pricing, has changed industry perspectives.
More and more businesses are now embracing climate-smart investments, and the driver of such change is, not least, self-interest. A recent study looked at a sample of 1,700 leading international firms and found that money put into reducing GHG emissions saw an internal rate of return of 27 percent – a clear indication that those investments are paying off.
The Science Based Targets initiative is one illustration of industry’s commitment to playing its part in decarbonizing the global economy. The initiative is a partnership between Driving Sustainable Economies, the UN Global Compact, the World Resources Institute and the World Wildlife Fund, helping companies determine how much they must cut emissions to prevent the worst impacts of climate change. So far, 155 companies have signed up for the initiative: Thirteen of them have successfully developed science-based targets which, by themselves, are projected to reduce emissions by 874 million tons of carbon dioxide – the equivalent of the yearly emissions of 250 coal-fired power plants.
Policy persuasion is most effective when it draws on the evidence base of all the social-science disciplines. Every strand of the social sciences – not just the mathematical precision of economics, but also the nuanced interpretations of history and the subtle trajectories of sociology – has a great deal to contribute as policymakers balance competing priorities.
That multidisciplinary approach – emphasized in such recent works as The History Manifesto, in which Harvard and Brown University historians call for policymakers’ greater reliance on the combined reasoning of all the social sciences – was thoroughly borne out in the recent Development Economics Series lecture by economist David Autor of MIT (who is a scholar at the National Bureau of Economic Research). Presenting a research paper on trade policy, and underscoring the importance of public opinion in shaping policymakers’ approach to it, Autor’s presentation used the logic of political science to highlight the electoral mood swings that help shape countries’ position on international trade.
Using the perspectives of political science – in the paper, “Importing Political Polarization? The Electoral Consequences of Rising Trade Exposure” (co-authored with colleagues from the University of Zurich; the University of California, San Diego; and Lund University) – was a valuable way to help remind Autor's economics-focused World Bank Group audience that policymaking does not occur in an academic vacuum. Even though the Bank’s economics-heavy analyses may try to distill policy options into quantifiable formulae, the policymakers whom the Bank advises get their political mandate from their countries’ volatile voters – who do not always follow homo economicus’ coldly rational approach to decision-making.
Amid the topsy-turvy 2016 electoral cycle in many countries – in which voters’ fears about job losses due to international trade have been inflamed amid an upsurge of populism and protectionism – you don’t have to be a public-opinion pollster to affirm Autor's assertion in his analysis of recent U.S. voting patterns: “We detect an ideological realignment that is centered in trade-exposed local labor markets and that commences prior to the divisive 2016 U.S. presidential election. Exploiting the exogenous component of rising trade with China and classifying legislator ideologies by their congressional voting record, we find strong evidence that congressional districts exposed to larger increases in import competition disproportionately removed moderate representatives from office in the 2000s.”
Translation: If you’re a pro-trade lawmaker in a district that has a high degree of imports from overseas, in a region that has endured what Autor calls “economic scarring,” then you’re likely to pay a heavy price at the ballot box – and, if you’re defeated, your successor just might be a strident protectionist. The Autor analysis shrewdly underscores the adjective “political” in the anodyne textbook phrase, “political economy.”
Telenor believes in empowering societies. Motivated by the prospect of building something that can make a difference for customers with very limited access to traditional financial services, we ventured to leverage our mobile tele-density strength in developing countries to bring about financial inclusion. Telenor has committed to enabling 50% of its customers to use their mobile phones for financial services by 2020, which means 100 million customers will have access to mobile financial services. We joined the UFA2020 initiative eager to learn from other players on shared challenges, drive strength from a common goal, and scale solutions that have demonstrated success in other markets.
We are about to launch in Myanmar and have obtained a banking license in India. We are already working in Bangladesh, Bulgaria, Hungary, Malaysia, Pakistan, Serbia and Thailand. In each country we have adopted different models of financial services catering to the needs of that market. For example, in Serbia fully owned Telenor Banka is the first fully mobile and online bank, consolidating banking needs in a unified digital interface, making it the fastest growing bank and the highest rated banking app in the region. In Pakistan, Telenor’s subsidiary Tameer Micro Finance Bank offers mobile financial services under the globally recognized brand of Easypaisa, serving over 20 million customers for domestic and international remittances, purchase airtime, pay utility bills, receive government social cash transfers, pay taxes, save and borrow money, buy insurance or make online retail purchases. We are picking up speed in delivering straightforward digital banking services in most of our Asian markets. Last year we established the groundwork for business in five out of six Asian countries, and this year we are focusing on expanding our footprint in these markets. When all businesses are up and running, we will be ready to build scale and to reach our 100 million customers target.
Despite the persistent low-growth environment, the benefits of the digital era are within our grasp to help reignite the growth engine.
Digital trade is the fastest-growing component of trade, and 4.4 billion people globally are yet to come online. In the first quarter of 2015 and in major U.S. cities, an average of 46 percent of all total paid car rides were through Uber. In Kenya, the digital payment system creates additional income for more than 80,000 small business owners. The Chinese e-commerce sector has created 10 million jobs. The Internet of Things, self-driving cars and 3-D printing have now arrived as part of the so-called Fourth Industrial Revolution.
These benefits will materialize faster if competitive dynamics allow and drive innovation. Disruptive innovation has a great potential to shake up markets, increase productivity and bring benefits to consumers. And yet, if there are government-imposed rules that close markets and unjustifiably protect incumbents from such competing new solutions, these benefits do not materialize. Cities around the world have blocked Uber from offering services. The debate on President Obama’s Executive Order to boost competition has centered around a pending decision by the communications regulator on whether to open the market for TV cable set-top boxes to allow for competition.
Conscious of such challenges, forward-looking competition authorities around the world are advocating several measures that will allow consumers and businesses to benefit from disruptive innovations and new business models. A new World Bank Group publication on competition advocacy tools highlights examples of successful initiatives to promote pro-competitive regulatory reform in markets subject to disruptive innovations.
In just a few years since the G20’s Global Partnership for Financial Inclusion (GPFI) published its initial White Paper, the role that global financial standard-setting bodies (SSBs) have on “who gets access to what formal financial services at what cost” has been increasingly recognized.
Appreciation has also grown for the important role that digitization of financial services plays in reaching financially excluded and underserved customers, and the implications this development has had on the SSBs.
There is still far to go, but the advances are noteworthy.
The GPFI’s new White Paper, Global Standard-Setting Bodies and Financial Inclusion: The Evolving Landscape documents this progress while flagging the disruptive forces that digital financial services represent for the formal financial system, as well as the opportunities and challenges they carry for the SSBs to develop standards that countries can apply.
Value addition through manufacturing has been a major focus of economic policymakers across the world, and at times with remarkable success, most famously in East Asia. Initial ‘Asian miracles’ in places like South Korea have since been eclipsed by the meteoric rise of manufacturing in China, which has grown its exports in manufactures by 18 percent a year over the past 10 years, compared to a global average of 7 percent (ITC Trade Map data).
Most countries generally seemed to follow a basic pattern, initially establishing manufacturing credentials in light manufacturing, such as in textile and apparel, but then in time moving on from such products to higher-value-added and more complex products. As they moved on and up, they opened space for other countries to move into the initial entry products, following the so-called ‘flying geese’ model of division of labor.
There have been noticeable absences though, with not all regions having moved into manufacturing. This is partially the case with Central and South America, but most strikingly with Sub-Saharan Africa.
What can be done to support countries in their quest to deepen their manufacturing sectors, and extract the jobs and technological development that this can offer? How can they develop the kinds of deep and comprehensive manufacturing ecosystems that have enabled China to maintain investment despite fast-rising labor costs?
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.
The World Bank and Rabobank Foundation are teaming up to strengthen financial cooperatives in rural areas to improve financial services for smallholder farmers and agricultural SMEs.
Financial services in rural areas are scarce and expensive. Servicing smallholder farmers spread across wide geographical areas isn’t attractive to mainstream financial institutions as their transactions are small, their cash flows seasonal and returns on investments can be risky due to potential crop failures or weather calamities.
To get access to savings and credit, rural households and farms often establish cooperative financial institutions (CFIs). While CFIs have a strong local presence and knowledge, they often have weak institutional capacity and governance, lack access to information technology, and suffer from political interference. Also, the laws regulating CFIs are often inadequate and supervision is weak, all of which hampers CFIs’ ability to deliver financial services. Often, CFIs don’t fall under the purview of the main financial sector regulator and supervisor, but of other entities that don’t always have the required capacity and expertise.
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.
I recently attended an SME Conference in Jordan around SME Finance and Employment – extremely important issues in a troubled region. All participants agree that much more needs to be done to address the lack of jobs in the region and to increase financial access at all levels, to individuals, households and small and medium scale enterprises (SMEs).
despite being a middle income region.
Only 4% of unbanked adults in the Middle East say that they don’t have an account because they don't need one. In other words, it is clear there is widespread unmet demand for financial services.
A person living in the Middle East is less likely to have a bank account than is a low-income person living in Africa or South Asia, and significantly less likely than a person living in Latin America, Eastern Europe or East Asia from comparable middle income country or region. This poses a dilemma – why?