Over the last 20 years, economic growth has helped to lift almost a billion people out of extreme poverty. But 1 billion people are still extremely poor. 1.1 billion live without electricity and 2.5 billion people without access to sanitation. For them, growth has not been inclusive enough.
In addition, growth has come at the expense of the environment. While environmental degradation affects everyone, the poor are more vulnerable to violent weather, floods, and a changing climate.
Development experts, policymakers, and institutions like the World Bank have learned a major lesson: If we want to succeed in ending poverty, growth needs to be inclusive and sustainable.
There is a growing consensus that a new approach is needed to meet the financial needs of developing countries to ensure sustainable, inclusive and resilient growth paths. We all know that Official Development Assistance (ODA) finance is limited and cannot address the massive investment needs of countries. In addition to increased domestic resource mobilization, the more effective engagement of a variety of players, especially from private sector, NGOs, and philanthropic organizations, will be key to close the finance gap.
This week at the Third International Financing for Development Conference in Addis Ababa, we’ve seen the birth of a new era in global health financing.
The World Bank Group, together with our partners in the United Nations, Canada, Norway, and the United States, just launched the Global Financing Facility in support of Every Woman Every Child. It’s hard to believe it’s been less than 10 months since the GFF was first announced at the 2014 UN General Assembly by World Bank Group President Jim Yong Kim, UN Secretary-General Ban Ki-moon, Prime Minister Stephen Harper of Canada and Prime Minister Erna Solberg of Norway. We’re grateful to the hundreds of representatives from developing countries, UN agencies, bilateral and multilateral development partners, civil society and the private sector who have contributed their time, ideas, and expertise to inform and shape the design of the GFF to get it ready to become operational.
This week in Addis Ababa, Ethiopia, during the Third International Financing for Development Conference, the United Nations, along with the World Bank Group, and the governments of Canada, Norway and the United States, joined country and global health leaders to launch the Global Financing Facility (GFF) in support of Every Woman Every Child. Partners announced that $12 billion in domestic and international, private and public funding had already been aligned to country-led five-year investment plans for women’s, children’s and adolescents’ health in the four GFF front-runner countries: Democratic Republic of the Congo, Ethiopia, Kenya and Tanzania.
Sub-Saharan Africa’s (SSA) impressive growth over the past decade or so has been matched by its equally impressive showing on the World Bank Group's "Doing Business" index. In 2012, one-third of the world’s top reformers on the index were from the continent, and every year its countries feature in the top 10 most active reformers. In 2014, five of the top 10 were from SSA.
Doing Business tracks progress in reforms that support a firm through its life-cycle, from start-up, through to raising capital, to potential closure. Through a mix of wide geographic coverage and rankings that generate a lot of public attention (not all of it wholly positive), the report has been a powerful motivator of investment climate reform, with the data serving as a useful means to measure progress made.
Doing Business as a start
While a large appeal of Doing Business as a measure of a country’s business environment is that it focuses on tangible business activities to which the private sector and policymakers can directly relate, its indicators are limited in scope. They are therefore intended to be used mainly as a litmus test of the state of a country’s investment climate. Therefore, while Doing Business's accessibility and global profile can be very useful in generating momentum for private sector reform, it ought to mainly serve as a starting point for a country to then engage in both broader reaching and deeper investment climate change. (This approach to the use of Doing Business has largely underpinned investment climate reform efforts in SSA by the Bank Group’s Trade and Competitiveness Global Practice.)
So, if Doing Business is a starting point and is used as such, is there evidence to support the assumption that it triggers wider and deeper private sector reform? Or is movement on Doing Businesses a starting point and, unintentionally, an ending point too?
Linkages to wider competitiveness reform data
One of the most comprehensive measures of the state of different countries’ business environments is the World Economic Forum’s (WEF) Global Competitiveness Index (GCI), a data set of over 110 variables that looks at the current state of, and tracks changes in, competitiveness across the world. The data set is structured under 12 pillars that cover measures from institutional development to technology and innovation.
Using GCI as a good measure of competitiveness, and interpreting changes in it as a reflection of a country’s effectiveness in engaging in wider competitiveness reform, we can look at the relationship between GCI and Doing Business and, significantly, the extent of movement on the two indices.
A high-level review of the relationship between changes in GCI and Doing Business for different regions between 2007 and 2013 shows SSA to have performed comparatively well on both indices, performing similarly to countries of Eastern and Central Europe and surpassing the world average. However, looking beyond averages to GCI’s specific pillars, SSA’s performance has been variable, advancing as a region in some areas more than others. Figure 1, below, shows GCI pillars where SSA has improved the most and the least, highlighting the top and bottom three.
Figure 1: Variations within competitiveness
(SSA score on GCI, total and select pillars)
Of particular interest is Pillar 6, Goods Market Efficiency, because many of the areas that this pillar tracks are also areas where the Bank Group has focused its investment climate reform interventions, from business entry and competition, to taxes, trade and investment. (Two of the 16 indicators in this pillar actually comprise Doing Business data – the number of procedures and days required to start a business.)
Pillar 6 is one of the top three GCI pillars that have the greatest upward pull on SSA’s overall performance on GCI, countering the areas where SSA has slipped in its scores.
Abebech, a single mother of three, in Arsi Negelle district in Ethiopia heads out for another shift at the construction site for gully embankments, part of a public works program offered by the Government of Ethiopia to address food insecurity.
Ethiopia’s Productive Safety Net Program (PSNP) reaches an estimated 9 million people across the regions of Amhara, Oromiya, Southern Nations, Nationalities, and Peoples Region, Tigray, Afar, Somali, Dire Dawa, and Harar. Food or cash payments are provided to very poor households. Payments are made in return for community work known as ‘public works’ – with participants working on soil and water conservation, construction of schools, health posts, childcare centers and road building. The work is scheduled usually after harvest season to ensure food security and enough money to carry through seasonal food shortages.
Poor households in Ethiopia face a series of economic, social and environmental risks and vulnerabilities with risks often higher for women. While women help with farming and related work, they also receive unequal access to resources, financing, training, and are also more vulnerable to household-related shocks -- illness, death of household member, drought, flood, price shocks, job loss, loss or death of livestock. Women in rural areas typically received poor education and are paid lower for the same type of work as their male counterparts.
Nighttime lights satellite imagery (DMSP-NTL) are now a popular data source among economists. In a sentence, these imagery encompass almost all inhabited areas of the globe, and record the average quantity of light observed at each pixel (nominal size ~1km2) across cloud-free nights for every year, 1992-2012. In under-developed or conflicted regions, where survey or census data at a fine level of spatial and temporal disaggregation are seldom available or reliable or comparable over space or time, NTL and other satellite imagery can be an excellent resource. Recent economics papers have used NTL to study growth of cities in sub-Saharan Africa (Storeygard (2015)), production activity in blockaded Palestinian towns of the West Bank (Abrahams (2015), van der Weide et al (2015)), and urban form in China (Baum-Snow & Turner (2015)) and India (Harari (2015)).
A new global network of Climate Innovation Centers will support the most innovative private-sector solutions for climate change.
Pop quiz: What does an organic leather wallet have in common with a cookstove for making flatbread and a pile of recycled concrete?
Believe it or not, each of these represents something revolutionary: a private sector-driven approach to climate change. Each of these products – yes, even concrete – is produced by an innovative clean-tech company. And as of March 26th, those businesses, and hundreds more like them, have something else in common. They’re connected through infoDev's newly established global network of Climate Innovation Centers (CICs), an innovative project that is taking the idea of green innovation beyond borders.
Having piloted the CIC model in seven different countries – Kenya, South Africa, the Caribbean, Ethiopia, Morocco, Ghana and Vietnam – it was time for infoDev, a global entrepreneurship program in the World Bank Group’s Trade and Competitiveness Global Practice, to follow a time-honored business practice: to scale up and take this movement global.
And so, as part of last month’s South Africa Climate Innovation Conference, we joined forces with 14 experts from the seven different countries where the CICs operate to establish the foundations of the world’s first global network devoted to supporting green growth and clean-tech innovation.
CIC staff debate and discuss the new CIC Network during the South Africa Climate Innovation Conference.
This global network of Climate Innovation Centers – business incubators for small and medium-sized enterprises (SMEs) – has been designed to help local ventures take full advantage of the fast-growing clean-technology market. The infoDev study “Building Competitive Green Industries” estimates that over the next decade $6.4 trillion will be invested in clean technologies in developing countries. An even more promising fact is that, out of this amount, about $1.6 trillion represents future business opportunities for SMEs, which are important drivers of job creation and competitiveness in the clean-tech space.
- sustainable development; sustainable leadership; climate change innovation; alleviating poverty;
- Climate Change
- climate action
- Apps for Climate Change
- Apps for Climate
- Africa climate change
- Information and Communication Technologies
- Private Sector Development
- Climate Change
- South Africa
In Ethiopia, registering a trade name-- a precondition for a business startup-- had long been one of the most cumbersome procedures of starting a new business. One had to make frequent visits to the Ministry of Trade with a number of potential trade names, which in most cases were routinely rejected for no clear reason. In one documented instance, an applicant had to submit eighty different names before he was issued a legally registered trade name. The inordinate amount of time that one would spend in the process had created a huge public outcry.
Thankfully, things have changed. The Ministry of Trade, with support from the World Bank Group’s Investment Climate Program, has issued a new, simplified, and modern Trade Name Registration Law.