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Governance

To Meet the Jobs Challenge, Maximize the Impact of SMEs

Klaus Tilmes's picture

The urgent challenge of generating jobs and incomes – as the world’s working-age population is poised to soar – will require making the most of all the job-creating energies of the private sector and the strategy-setting skill of the public sector. Today in Ankara, Turkey, the World Bank Group renewed its commitment to strengthen the global economy’s most promising and inclusive source of job creation: small and medium-sized enterprises (SMEs).

At a signing ceremony at the B20 conference of global business leaders – coinciding with the G20 forum of government leaders from the world’s largest economies – the Bank Group joined in a partnership with a new organization promoted by the B20: the World SME Forum (WSF), which is to become the global platform to coordinate practical assistance and policy support for SMEs.

Based in İstanbul, WSF has been founded through a partnership between the Union of Chambers and Commodity Exchanges of Turkey (TOBB), the International Chamber of Commerce (ICC), and ICC’s World Chambers Federation.



World Bank Group President Jim Yong Kim – in Ankara, Turkey, on September 4, 2015 – signs a Memorandum of Understanding to confirm the Bank Group's partnership with the World SME Forum. Also signing the document, along with President Kim, is Rifat Hisaciklioglu, the Chairman of B20 Turkey and the President of TOBB (the Union of Chambers and Commodity Exchanges of Turkey).

SMEs are a vital engine of innovation and entrepreneurship, and the success of the SME sector is central to every country’s prospects for job creation and economic growth. Providing support for SMEs is a fundamental priority for the World Bank Group, as we pursue our global goals of eradicating extreme poverty by the year 2030 and boosting shared prosperity.

SMEs are crucial to every economy: They provide as much as two-thirds of all employment, according to a recent survey of 104 countries – and, in the 85 countries that showed positive net job creation, the smallest-size enterprises accounted for more than half of total net new jobs.

However: As a recent B20 policy paper has outlined: The growth of SMEs – more so than large firms – is hampered by many challenges. Those restraints are concentrated in two broad areas – and they are especially troublesome for developing countries.

One question, eight experts, part six: William Dachs

William Dachs's picture

To gain a better understanding of how innovation in public-private partnerships (PPPs) builds on genuine learning, we reached out to PPP infrastructure experts around the world, posing the same question to each. Their honest answers redefine what works — and provide new insights into the PPP process. This is the question we posed: How can mistakes be absorbed into the learning process, and when can failure function as a step toward a PPP’s long-term success?

Our sixth response in this eight-part series comes from William Dachs, Chief Operating Officer of the Gautrain Management Agency in South Africa. 

South Africa's Gautrain.
Photo: Wikimedia Commons

The ability of a national PPP program to apply lessons learned from one project to the next is dependent on factors such as the documentation of case studies and the use of a central repository of information in a PPP unit at the national level, where such lessons can be distilled and applied to the next project in that jurisdiction.

There are plenty of good examples of such programs that learn from and apply lessons. But how are individual PPP projects able to absorb mistakes and still meet the original objectives of value for money for the users of the services and the taxpayers who may ultimately bear the risk of the project failing?

It is impossible to predict the range of possible risks and to allocate these with precision over 20 to 25 years in a complex and changing environment. As such, the key to achieving long-term value from a PPP does not only lie in the quality of the feasibility and procurement phases, but also in how the balance of risk and rewards is established and applied in the PPP contract so as to be able to survive significant changes over a long period of time.

Lessons from the taxi industry to improve Romania’s governance

Ismail Radwan's picture
taxi in Romania
Photo: Daniel Kozak, World Bank


The first time I came to Bucharest in 2013 the Bank office offered to arrange a pick up from the airport. Being a seasoned traveler, I declined the offer. I reasoned that I had lived and worked in so many countries I could manage the transfer to the hotel without assistance. I was wrong.
 
I picked up my luggage to find a local cab outside the airport. A taxi driver offered me a ride. I didn’t negotiate the price upfront seeing that he had a meter in the car.
 
Twenty minutes later we reached the hotel. The meter read Lei 200 - at the that time about $60. That was over twice the going rate but there was little else I could do. I felt cheated as so many tourists do.
 
I learned from the experience, accepted offers of help from colleagues and paid more attention to rates going forward.
 
About a year later I returned to Bucharest to find a new system in place.  An electronic kiosk had been installed at the airport.  Arriving visitors could now press a button to get an estimated wait time to hail a taxi. I took my ticket. It was a smooth ride.
  
What made the difference? 
 
The new taxi ordering system is now available on mobile phones mirroring, in many ways, the service provided by Uber. Passengers can rate drivers and increase accountability.  
 
Bucharest has gone from being a difficult place to find an honest cab driver to one of the most convenient. 
 
The change has been driven by incentives and improved technology. 

 What are the implications for governance reform? 

The future of government is open

Stephen Davenport's picture


The World Bank Group sees the pillars of a more open and citizen centric government--transparency, citizen participation, and collaboration--as strategic priorities in its work on governance because they suggest concrete ways to promote shared prosperity. Having made significant strides to increasing openness in the Bank's own work, we seek to build on this progress to support client governments in their own efforts to make the development process more inclusive. 

What are we talking about when we talk about “subnational” governments?

Arturo Herrera Gutierrez's picture
Municipality of Guatapé in Colombia. Photo - Adrienne Hathaway / World Bank
Municipality of Guatapé in Colombia. Photo - Adrienne Hathaway / World Bank


Over the last 25 years, the relevance of local governments (states, provinces, municipalities, etc.) in Latin America has been constantly increasing.

The process started with a wave of decentralization, particularly in the education and health sectors, followed by the increasing of other responsibilities of local governments (with the accompanying budget!), and most recently topped off by the allocation of additional investment resources fueled by the commodities boom of the mid-2000s. Currently, in some countries, half of the national budget is now allocated to lower levels of governments.

The World Bank has a long history supporting countries in the region as they transition political, administrative, and fiscal responsibilities to subnational levels, as part of national strategies for strengthening democracy, transparency, and efficient service delivery. 

Preventing renegotiation, fostering efficiency

Rui Monteiro's picture
Lawyers usually say that “the best contract is the one you never have to pull out of the drawer” — a view that focuses on trust, common understanding and mutual advantages. And then they will add that public-private partnership (PPP) contracts, even with the best government–business relationship, are a bit more complex. That’s because they are based on incentive mechanisms that require not only regular monitoring, but also some degree of cooperation and a modicum of strategic management — the three components of PPP contract management.
Photo: Wikimedia Commons
The ultimate success of a PPP contract depends on effective service delivery under conditions of sustained efficiency. The efficiency comes from linking private operator rewards to performance over the long-term (output focus), and from providing credible commitment by the private partner through private finance (or, as it’s known in some circles, “hostage capital”).
There are many cases, as seen in previous issues of Handshake, of PPPs providing high-quality reliable service to users at a reasonable cost for users and taxpayers. But there is also recognition that, over the long-term, PPP efficiency may be jeopardized by contract renegotiation — by necessity renegotiation under no competitive pressure, with asymmetrical information.

This sort of renegotiation creates a risk of breaking the initial commitment, changing rewards and risk allocation. Though theoretical economists would say 
that “in the long-term” renegotiation of incomplete contracts is unavoidable, PPP practitioners should do their best in order to avoid the need for renegotiation, while simultaneously preparing for renegotiation when it is the best solution in terms of public interest.

Creating good jobs in Africa: demand- and supply-side policies

Stephen Golub's picture
In Africa people do have jobs: they are simply too poor not to work.  Instead, the problem is underemployment; typically 90% (or more) of the labor force is in the informal sector such as subsistence agriculture and urban self-employment in petty services.  African labor markets remain marked by large disparities in incomes between a small number of formal public and private employees, and the vast informal sector. These informal sector workers have no job security, minimal benefits, very low pay, and often face hazardous working conditions.  So the challenge is to create better jobs, as well as more jobs.
 

Activist strategies to sharpen economies' competitive edge: When Bernanke & Company speaks, policymakers listen

Christopher Colford's picture

So much for the myth that Washington empties out during the month of August. A standing-room-only throng flocked to a Monday-morning Brookings Institution seminar this week featuring a relative newcomer to the think-tank communityBen S. Bernanke, the former chairman of the U.S. Federal Reserve System. His wide-ranging and nuanced analysis – with all the gravitas that he once brought to his graduate economics seminars at Princeton – explored not just Brookings’ main topic of the day (“The Defense Economy and American Prosperity”) but also such subjects as macroeconomic management, the gradual recovery from the Great Recession, and lawmakers’ need to avoid hasty budget-cutting that would damage vital investment in long-term priorities. Offering some of the wit of his new blog for Brookings, Bernanke’s whirlwind analysis whetted Washingtonians’ appetite for the October 4 publication of his latest book, “The Courage To Act.”

The economic impact of U.S. military spending was the focus of Monday’s seminar, chaired by Brookings defense-policy scholar Michael O’Hanlon – but an additional, broader theme was unmistakable throughout the discussion. The competitiveness of every economy is shaped by its ability to make sustained investments in productivity-enhancing technologies – and, as the panelists explored within the context of the U.S. economy, R&D-intensive industries (whether military or civilian) have been on the leading edge of innovation, patenting, productivity growth and job creation.

Competitiveness is the holy grail of economic policymakers everywhere – and activist strategies can help every economy hone its competitive edge. For both theorists and practitioners in development, working with economies large or small, the Brookings panel’s focus on pursuing far-sighted and pro-active investment strategies holds implications for every country’s competitive positioning.

Tourism ecosystems: A way to think about challenges and solutions to tourism development

Shaun Mann's picture

Ecosystem: A complex of living organisms, their physical environment, and all their interrelationships in a particular unit of space.
Tourism: A social, cultural and economic phenomenon that entails the movement of people to countries or places outside their usual environment for personal, business or professional purposes.

I was part of a tourism ecosystem, once, when I built and operated a small lodge on the banks of the Nile in Uganda. While I was living in a tent in the bush building the lodge, life was simple: My little ecosystem was the land around the lodge and the tribulations of fending off monkeys and snakes by day and leopards, hippos, elephants and mosquitoes at night. The sun and rain beat down hard, and tools and workers broke down regularly. The generator was a particular pain in the neck.

Apart from supplies coming in, I was not really connected to the outside world. Money ran out for awhile and I had to rush to Kampala and persuade the bank give me a bigger overdraft (at 26 percent interest – thieves!).
 
Once the lodge was finished, I had to join another ecosystem: the world of registering the company, getting licenses, drawing up employment contracts, getting a bank overdraft, getting a tax ID number – all the elements of the enabling environment for me to do business. Then I had to join another one: I needed bums on beds, and I had to link my wonderful product to local markets; I had to develop promotional materials and packages; I had to interact and contract with tour operators and local travel agents to supply me business; I needed market access. 



Nile Safari Camp: home for two years

Then, guess what? My business plan wasn’t panning out. I didn’t get the occupancies or the rates that I projected from the local market. I had to step into yet another ecosystem: the world of international long-haul travel. I needed more and better-paying customers. I had to understand how the big international tour operators sold their product, what they were looking for in new product and how they contracted. I had to join another ecosystem to make that happen. Turns out my little product wasn’t enough to attract international customers on its own, I had to team up with other lodges and offer a fuller package; we had to cluster our products. I had to diversify and innovate and find ways to add value to my accommodation offer – birdwatching, fishing, guided walks, weddings and honeymoons, meetings and workshops. . . . Well, there are whole ecosystems around each of those market segments. You need to understand them before you can do business with them.        

Integrity due diligence: How much do we need to know?

Samuel Harrison Datlof's picture



The World Bank’s “zero tolerance” policy on corruption makes clear how thieves and embezzlers will be dealt with, if they are discovered. But what about before corruption actually occurs—how should the Bank go about preventing fraud and corruption in the first place?

The divide between prevention and enforcement shapes the World Bank’s fight against corruption in ways both subtle and profound. Enforcement is easier to conceptualize; it is tangible. Someone commits fraud or corruption, by siphoning Bank funds away from their intended purpose.  When the Office of Suspension and Debarment slams a company with a sanction, we can quantify the effect.

Prevention, on the other hand, is a slippery idea. It evades definition. Quantifying how much fraud a policy prevents relies on counterfactuals, making it far more difficult to pin down. This means, for better or for worse, innovations and efforts towards the prevention perspective may lag behind enforcement.


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