How can countries create 600 million jobs for its citizens?
As the World Bank convenes its Spring Meetings in Washington this week to discuss the state of international development, the question on everyone’s mind is: How to restart growth and create jobs?
Job creation on an unprecedented scale is needed to avoid severe social dislocation: About 22 million jobs were lost worldwide during the global financial crisis – at a time when many developing countries face an explosion in their working-age population. According to the Bank’s “World Development Report 2013,” 600 million jobs need to be created in the next 15 years just to maintain current employment rates.Governments, central banks and international institutions have tried to jump-start growth: Interests rates have been driven to the lowest possible levels in many countries; the IMF is lending to troubled economies; and additional pro-growth measures are under consideration. Nonetheless, an economic recovery is still struggling to gain traction.
A promising and radical change of approach, however, comes from the Competitive Industries Practice, which is part of the Bank’s Financial and Private Sector Development (FPD) network. The Practice – kick-started by the Competitive Industries and Innovation Program (CIIP), a trust fund supported by the European Commission, Austria and Switzerland – recently set a goal of helping create 100 million jobs in 15 years.
How on earth can we achieve this? This goal may be ambitious – yet we believe it can be done.
Competitiveness and Innovation programs: unleashing growth and job creation
Interventions at the macro level are well understood, and they are advocated by the Bank and the International Monetary Fund. Investments at the firm level – led by the International Finance Corporation, the private-sector arm of the World Bank Group – support the creation of a productive base in strategic sectors.
While macro-level action and firm-level investments are necessary, they are not sufficient. Macroeconomic reforms take time to have an effect, and they are unlikely to generate jobs immediately. Firm-level investments are an effective way to create opportunities, but they do not achieve a giant scale. We thus need to intervene at the industry level.
Industry-level intervention, though, is difficult in practice. It requires coordinated, multi-sector programs in both “hard” and “soft” infrastructure to quickly boost competitiveness and innovation – aiming to bring together the public and private sectors to unlock the full potential of value chains and clusters.
As analyzed in a forthcoming paper from the Center for Global Development, by Vijaya Ramachandran and Alan Gelb, this type of approach has “a focus on externalities and doing a lot of things at the same time to achieve a critical mass. . . . Many projects will combine elements of physical investment, regulatory reform and capacity building.”
Overall, such interventions are not only about (for example) the transport, energy, water or regulatory environment. The strategy involves all of those factors at the same time, geared toward one objective: jobs.
Competitive Industries can help reinvent the Bank’s approach, and can deliver on our promises
Competitive Industries aligns the Bank’s many sector-focused units in a way that takes a much bolder approach to delivering targeted interventions. It offers a platform for cross-sector approaches, in which such factors as access to finance, investment climate, infrastructure, skills development and innovation are all combined to address the challenge of competitiveness. Competitive Industries links public-sector policies and private-sector investments to spur growth and inspire job creation.
Competitive Industries, with an acute understanding of the private sector and strong relationships with governments, serves as an honest broker: independent from the private sector, and able to explain business’ priorities to government leaders.
Taking a pragmatic view about growth, there’s no need for Competitive Industries to engage in any theoretical debate about industrial policy. What matters, for pragmatic practitioners, is avoiding the flaws of old-fashioned industrial policy and maximizing impact for the Bank’s clients by achieving job creation.
We have started, but it takes courage from all of us to do much more.
Competitive Industries has only recently been created as a unit of the Bank, but we have already begun to help our clients achieve progress.
In Afghanistan, for example, we have been at the heart of a large, cross-sector engagement focused on creating diversified benefits and jobs from a “resource corridor” that will channel investments into mining, oil and gas. In Nigeria, we are focusing on firm-level growth in manufacturing, and on creating a range of clusters with an innovative design: It will add and remove clusters according to how they survive market tests and how they deliver results in growth and employment.
In addition: In Bangladesh, our effort to develop special economic zones has already resulted in an additional $113 million in investments – and the creation of 15,000 jobs. We have also successfully engaged with the government of Macedonia to enact reforms that will strengthen competitiveness in the manufacturing, agribusiness and trade logistic sectors. All of those projects, under the CIIP platform, have the combined potential of directly contributing to millions of jobs.
By studying the results of the projects that are under way, the pragmatic approach we are proposing can help learn from what works and what does not. It is meant to be reactive to our government clients’ demands and to focus more on results on the ground in a pragmatic way. Looking at the US$4 billion of Bank lending that supports this theme across the world, we can indeed achieve our goal of creating 100 million jobs in the next 15 years.