We all have regular bills to pay for the ubiquitous services we consume – whether they be for utilities (water, heating, electricity etc.), credit cards, memberships, or car payments. But, not everyone pays.
So why don’t people pay? Why are some countries better at this than others? And what can be done to improve systems for debt collection?
Economists tend to agree on the importance of competition for a sound market economy. So what’s the problem when it comes to governments competing to attract investors through the tax treatment they provide? The trouble is that by competing with one another and eroding each other’s revenues, countries end up having to rely on other—typically more distortive—sources of financing or reduce much-needed public spending, or both.
All this has serious implications for developing countries because they are especially reliant on the corporate income tax for revenues. The risk that tax competition will pressure them into tax policies that endanger this key revenue source is therefore particularly worrisome.
Prior to the Jasmine Revolution of 2011, the government of Tunisia was extremely centralized, and citizens had limited ways to hold it to account. The revolution created a force to change the concentration of power and the ability of Tunisians to hold the government to account. Specifically, the government created a decentralization program supported by the World Bank’s Urban Development and Local Governance Program for Results (UDLGP), along with support programs from other partners including the European Union, Swiss Cooperation.
One dramatic shift the program has introduced is the development and execution of an annual local government performance assessment. Every year, Tunisian cities’ local governments each get assessed by a semi-autonomous agency on a range of areas, which are critical for their ability to effectively govern as well as to deliver services and infrastructure. In the inaugural assessment (2016), the local government of Krib, a town in one of the most lagging interior governorates called Siliana, outperformed all others and achieved the highest assessment score.
To learn more about the program, watch a video with World Bank Senior Director Ede Ijjasz-Vasquez (@Ede_WBG). Check out Tunisia’s first-ever local government website to track the performance of Tunisia’s local governments over time (the results of the 2017 assessment which will be posted soon).
Foreign direct investment (FDI) is often considered by economists and policymakers as integral to economic growth – a cornerstone of modernization, income growth and employment.
Yet for many countries, FDI can be elusive, and chasing it can lead policymakers to frustration.
Even economies built by FDI – for example, Singapore – are on this continuous chase, aware that attracting and retaining FDI is not an easy task. They also know that the benefits of FDI do not accrue automatically and evenly across all countries, sectors and local communities.
But first, there must be a realization of the importance of FDI. Singapore – a country once called a “political, economic and geographic absurdity” by its first Prime Minister, Lee Kuan Yew – never doubted the centrality of FDI, promoting it from the outset of its independence. Singapore saw in FDI an opportunity to develop a substantial industrial base, to create new jobs for its then-poor and low-skilled workforce, and to generate crucial tax revenues for its nascent government to spend on education and infrastructure.
Two decades after that initial strategic acceptance of FDI, Singapore emerged as a newly industrialized economy.
It is little surprise, then, that Singapore’s experience was highlighted at a recent World Bank Group peer-to-peer learning event here in the city-state. Responding to strong demand from client countries, two teams from the Trade & Competitiveness Global Practice – the Investment Policy and Promotion (IPP) team and the Singapore Hub team – co-hosted the learning forum entitled "Promoting Investment Policy and Promotion Reform in Times of Uncertainty."
Supported by SPIRA – the Support Program on Investment Policy and Related Areas – the forum enabled some 80 government officials from East Asia, South Asia and Africa to share their experiences in economic and export diversification; to discuss the role of international trade and investment agreements as leverage toward domestic reforms; and to discuss how to translate investment policy and promotion strategies into measurable results. SPIRA, implemented by the IPP team, supports client countries across all regions in attracting, facilitating and retaining different types of FDI.
Vietnam has a vision. By 2035, it aspires to become a prosperous, creative, equitable and democratic nation. Achieving this ambitious goal has set Vietnam on a path of transformation on multiple fronts – economic, social, and political.
At the core of this transformation is the re-orientation of the state’s role in economic management. This requires adapting Vietnam’s economic governance so that the state becomes a skilled facilitator of three types of relationships: among government agencies, between the state and market, and between the state and citizens.
Not too long ago, Malaysia walked in Vietnam’s shoes, implementing its own wide-ranging transformation. In 2009, Malaysia embarked on the National Transformation Program (NTP) that included focus on both government and economic transformations. Malaysia had also adopted good practices that simplified regulations, which made it easier for firms to interact with the state.
In Afghanistan, decades of violence, common discriminatory practices, and cultural barriers, including restrictions on mobility, have denied women job opportunities and left them severely underrepresented in all sectors of society.
Despite considerable achievements in the last decade, such as the national Constitution guaranteeing equal rights as well as increased enrollment in public schools and universities, achieving gender equality will require widespread social changes.
With a workforce of about 7,000, the company employs only 218 women, most of whom at a junior support level. However, under the leadership of its new CEO, DABS management has committed to promoting gender equality.
The Planning and Capacity Support Project of the Afghanistan Reconstruction Trust Fund (ARTF), managed by the World Bank, is helping DABS deliver on that commitment. The project organized awareness sessions for DABS staff on gender-related issues and provided specialized training to female employees. DABS has committed to providing internships to female university graduates to ensure women can find job opportunities and fully participate in the energy sector.
Realizing that the majority of its female staff lacked the confidence to compete with men, DABS is facilitating access to new job opportunities for women employees and has taken steps to ensure that women are involved in all business operations within the organization.
In recent years, Nepal has made the headlines for the wrong reasons. In April 2015, it was shaken by a huge earthquake that claimed thousands of lives and caused country-wide destruction. In previous decades, it suffered political violence and chronic instability.
Over the course of four years, Nepal’s Ministry of Industry, the country's Office of the Company Registrar (OCR) and IFC’s Investment Climate Team implemented a series of reforms to encourage business registration online. In 2013, a new mandatory online registration service was launched. Help desks in the Kathmandu OCR office, extensive training for business owners, a media campaign, and an enabling legal directive eased the speed and efficiency of the registration process for businesses.
Within a short period of time, almost 100 percent of companies – as opposed to 10 percent during the initial phase of launch – were registered online. Registration became simpler, saving money for both businesses and the government. Online registration also addressed the challenges of the government's limited capacity and poor technology readiness through extensive training and peer-to-peer learning. The processes became more transparent with online file tracking.
In the year following the launch of the online registration system, Nepal’s ranking for "Starting a Business" in the World Bank Group’s 2014 Doing Business Report rose by 6 places. The number of days it took to start a business dropped by 45 percent and led to a 24-percent increase in the number of new companies registered annually.
In Nepal, an employee of the Trade and Export Promotion Centre works on the Nepal Trade Information Portal. The portal, financed under the Nepal-India Regional Trade and Transport Project, provides information that traders need to import and export goods, including information on permits, laws and taxes. Photo Credit: Peter Kapuscinski / The World Bank
These successes produced broader lessons for Nepal and others facing similar challenges. These include:
Make change compulsory, easy and durable. People adapt to new circumstances only if they feel compelled to do so, and only if they fel that the change is not going to disrupt their businesses.
Ensure coordination between government offices in supporting initiatives. There must be "buy-in" from all government agencies involved at all levels. ICT changes must be fully coordinated with business staff.
Nurture trust and cooperation between the WBG and government teams. Study and learn about previous experiences, communicate how the current project will be carried out, and keep talking to partners in government.
While some may think the Sri Lanka’s cricket team did well in the recent Champion's Trophy, myself included, vigorous debates have been going on, on TV and social media and even here in our office which clearly suggests that not everyone agrees on their performance. Despite these differences in perspective, I witnessed the excitement of many of my colleagues and friends from different parts of the world as they cheered, supported opposing teams, analyzed the games, and mulled the behind the scenes politics that affect the game, and also passed judgements on winners and losers. The key point here is that for Sri Lanka to be in the top 8 internationally they had to play other countries. This analogy fits well with how economies grow and are recognized; so hold on to this thought.
Reading through the many articles in the news, be they paper, internet or just exchanges between citizens on social media, one thing is clear, there is no one unified view on how Sri Lanka is growing. While developed countries would salivate at a growth rate of 4.4 percent, in Sri Lanka it is considered below potential. Some even question if it’s growing! The result is a confusing landscape on an important issue that touches everyone in some way.
Twice a year the World Bank adds data and analyses to the many out there. We try to answer questions such as: what is Sri Lanka’s actual growth? Which parts of the economy have grown and which have not? If the country is to accelerate growth, what needs to be done? What can its people do to help? We know from cricket that the players can be excellent but if no-one cheers for them, they lose interest and cannot be successful. Eventually the game loses its luster and the competitive edge of the country’s ranking also slips. Both sides need to understand what needs to be achieved, how, by whom and when the team doesn’t quite deliver in a match, what part of the game should they change. This is what has made Sri Lanka a cricket powerhouse.
They say a picture is worth a thousand words. While visiting the World Bank library the other day, I was struck by how many development publications featured pictures of motor vehicles on their covers, even though most of them covered topics that had little to do with transport. The setting and tone of the pictures varied – sometimes they showed a lone car on a rural highway, sometimes congested vehicles in urban traffic, and sometimes a car displayed proudly as a status symbol – but the prevalence of motorized vehicles as a visual metaphor for development was unmistakable to me: in the public imagination, consciously or otherwise, many people associate development with more use of motorized vehicles.
Indeed, motorization – the process of adopting and using motor vehicles as a core part of economic and daily life – is closely linked with other dimensions of development such as urbanization and industrialization.
Motorization, however, is a double-edged sword.
For many households, being able to afford their own vehicle is often perceived as the key to accessing more jobs, more services, more opportunities—not to mention a status symbol. Likewise, vehicles can unlock possibilities for firms and individual entrepreneurs such as the young man from Uganda pictured on the right, proudly showing off his brand new boda boda (motorcycle taxi).
But motorization also comes with a serious downside, in terms of challenges that many governments have difficulty managing. Motor vehicles can undermine the livability of cities by cluttering up roads and open spaces—the scene of chaos and gridlock in the picture below, from Accra, is a telling example. In addition, vehicles create significant safety hazards for occupants and bystanders alike… in many developing countries, road deaths have effectively reached epidemic proportions. From an environmental standpoint, motorized transport is, of course, a major contributor to urban air pollution and greenhouse gas emissions. Lastly, motorization contributes to countries' hard currency challenges by exacerbating their long-term demand for petroleum products.
Given these challenges, how are developing countries going to align their motorization trajectories with their development goals? What should the World Bank advise our clients about how to manage this process?
How do we prove who we are to the people and institutions with whom we interact? Imagine trying to open your first bank account, prove your eligibility for health insurance, or apply for university without an ID; quality of life and opportunities become severely restricted. An officially-recognized form of ID is the key enabler – critical not only for exercising a wide range of rights but also for accessing healthcare, education, finance, and other essential services. According to the World Bank Group’s latest estimates, this is problematic for an estimated 1.1 billion people around the globe.
Addressing this most basic barrier was the rationale behind the international community’s decision to set target 16.9 in the UN Sustainable Development Goals: “to provide legal identity for all, including birth registration” by the year 2030. It was also the impetus for the World Bank Group’s launch of the Identification for Development (ID4D) initiative in 2014.
In order to work effectively towards this ambitious goal, governments and development partners need to understand the scale of the challenge – and every year the World Bank Group updates the ID4D Global Dataset to do just that. Using a combination of publicly available data (e.g. birth registration coverage rates from UNICEF) and self-reported data from ID agencies, we estimate the population without an officially recognized ID in 198 economies. In addition, we collate relevant qualitative information such as details on the agencies and ministries responsible, and the prevalence of systems which are digital (now introduced in 133 economies, but not necessarily with full coverage in each).