Syndicate content

Law and Regulation

4 key challenges for reforming state-owned enterprises: Lessons from Latin America

Fanny Weiner's picture
Man fixing railroad tracks. Mexico. Photo - Curt Carnemark / World Bank


Efficiency. Competitiveness. Innovation. Integrity.

Do these words come to mind when you think of State-Owned Enterprises (SOEs)?

From June 2-3, 2015 in Santiago, Chile, over 100 representatives of governments, SOEs, and academia from 13 countries came together to discuss how to advance these ideals, at the fourth Annual Meeting of the Latin American Network on Corporate Governance of State-Owned Enterprises, co-organized by the World Bank, the Organisation for Economic Co-operation and Development (OECD), and the Latin American Development Bank (CAF). 

SOEs are commercial enterprises owned by governments, in full or in part. Across Latin America, SOEs still represent a significant portion of GDPs, national expenditures, employment, and government revenues. Many SOEs provide essential public goods and services like water, electricity, and transportation.

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 Hisarciklioglu, 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.

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.

​LGBTI people are (likely) over represented in the bottom 40%

SOGI Task Force's picture


World Bank President Jim Kim recently said “we will not reach our twin goals […] unless we address all forms of discrimination, including bias based on sexual orientation and gender identity.”

Sexual and gender minorities are particularly important for the Bank because they are (likely) overrepresented in the bottom 40% -- the target of the Bank’s goal to promote shared prosperity.

Why only “likely”? Because robust data on LGBTI development outcomes is rare, even in high income countries.  With support from the World Bank’s Nordic Trust Fund, we are seeking to fill some of these data gaps, starting with research in the Western Balkans.

What we do know is that, across the board, barriers to education and employment contribute to greater chances of being poor – and this may be worse for LGBTI individuals. 

Available data on Lesbian, gay, bisexual, transgender and intersex (LGBTI) people shows that youth are more likely to face barriers in getting a good education.  It’s also harder to find – and keep – a job, pushing LGBTI people further into poverty.

For success and sustainability, seek broad social ‘well-being’; Good governance promotes a ‘virtuous cycle’ of growth

Christopher Colford's picture

Beyond the cold calculus of GDP and TFP and FDI, development is about promoting strong societies as well as propelling powerful economies. But how can we measure societies’ progress toward success? Some may try to calculate “Gross National Happiness” as a yardstick, and some may envision “getting to Denmark” as the ideal end-of-history destiny of development – but are there patterns that reveal how societies can flourish?

Two recent Washington seminars suggest that – by pursuing innovation and inclusion, and by focusing on broad-scale social “well-being” – policymakers can define realistic paths toward development success.

The methodologies used by Harvard economist Philippe Aghion at an International Monetary Fund forum and by former World Bank strategist Enrique Rueda-Sabater at a Center for Global Development discussion may have been different, but their conclusions were in harmony: Societies thrive – in a sustainable way – when inclusion and innovation help expand the circle of opportunity, and when strong governance standards lead to sound civic decision-making.

Taken together, the two seminars’ insights should help inform policymakers’ debate about the Sustainable Development Goals, which are due to be approved in September at the opening of the United Nations General Assembly.

Aghion, at an IMF seminar (sponsored by its Low-Income Countries Strategy Unit) on June 30, approached the topic of “Making Growth Inclusive” by imagining “how to enhance productivity growth while promoting social mobility.” Presenting data from a recent paper on “Innovation and Top-Income Inequality,” which he recently co-authored with an all-star team of economists, Aghion outlined the way that income and wealth inequality have drastically soared in developed countries since the mid-1970s – analyzing trends that by now are sadly familiar to the squeezed middle class, as calculated in the esteemed work of Thomas Piketty, “Capital in the Twenty-First Century.”

Building on that data, Aghion took the inequality-and-inclusion logic several steps further. He lamented the way that “skill-biased technological change” has (in the absence of policy safeguards) provoked societies to stratify along the lines of wealth, income, education and connections. Yet “creative destruction” is inevitable in “a Schumpeterian world,” reasoned Aghion: A significant factor expanding the wealth gap is the same process of continuous economic renewal that helps economies advance. “There is a big [economic] premium to being a superstar innovator,” he asserted, noting that “you can become rich by innovating” – and thus “innovation is a big part of top-1-percent income inequality.”



Philippe Aghion

“Creative destruction is good for social mobility” and broader inclusion, in the long run, because it causes a steady procession of “new innovators to replace old incumbents.” The effect of each wave of innovation is fleeting, especially in a hyperspeed economy: “You get temporary ‘rents’ when you innovate. You don’t get them forever,” because the relentless Schumpeterian process will eventually cause yesterday’s innovators to become, in turn, tomorrow’s has-beens.

The darker danger of entrenched inequality occurs, said Aghion, when incumbent interests use their political power to lobby for the protection of their advantages – whether by pleading for tax-code favors, seeking government-imposed barriers to the entry of new competitors, or purchasing influence with pliant politicians through campaign donations. (In an aside on U.S. politics, Aghion pointed to his paper’s data linking a state’s representation on the congressional Appropriations Committees with its amount of federal favors – a shrewd quantification of the pork-barrel compulsions of Capitol Hill.)

Because innovation promotes social mobility and thus greater inclusiveness, Aghion contended that “innovation is a good guy; lobbying is a bad guy.” So “if you’re for inclusive growth, then you will be against lobbying and [the creation of] entry barriers.”

Focusing simply on present-day inequality is less informative than focusing on social mobility, he asserted. There’s nothing wrong with an economy that bestows ample financial rewards upon genuine innovators who create new products and processes. There is, however, something deeply wrong – and economically growth-inhibiting – with governments that allow no-longer-innovative incumbents to use their political connections to suppress potential competitors.

The IMF panel’s respondents amplified Aghion’s analysis. World Bank economist Daniel Lederman noted that it would be wise to use “the lexicon of ‘inequality of opportunity’,” because some degree of wealth inequality is inevitable (and perhaps even desirable) when individuals’ talent and effort are rewarded with rising incomes. IMF economist Benedict Clements – deploring the “great degree of disparity in ‘equality of opportunity’ ” that now prevails in advanced economies, including the United States – noted that there need be “no conflict between equity and efficiency if you design your policies right.”

Getting policies right – by upholding strong standards of governance – was also one of the underlying themes at a July 21 seminar at the Center for Global Development led by Rueda-Sabater, who is now a senior advisor to the Boston Consulting Group and a visiting fellow among CGD’s strong lineup of scholars. Rueda-Sabater is well remembered at the World Bank for leading a research team’s detailed “scenario planninganalyses that, in 2009, discerned the contours of three possible scenarios for the world in the year 2020.

Presenting a recent BCG report, “Why Well-Being Should Drive Growth Strategies,” Rueda-Sabater outlined an imaginative BCG diagnostic tool: the “Sustainable Economic Development Assessment” (SEDA), which measures the relative well-being of 149 countries by gauging their success in converting wealth into well-being – that is to say, in effectively translating their potential into tangible progress.


 

Five lessons of regional integration from Asia, America, and Africa

Sanjay Kathuria's picture
More than 50% of today’s international trade goes through regional trading arrangements.  While trade is a critical component of regional integration, integration has several other dimensions including energy cooperation and intra-regional investment, to name a few.  After carefully examining cases of regional integration in Southeast Asia, the Americas and Africa, we present five lessons for South Asia.

Lesson 1: Facilitate trade in goods and services

Despite falling tariffs, there is still a large gap between the price of the exported good and the price paid by the importer, largely arising from high costs of moving goods, especially in South and Central Asia. On a percentage basis, the potential gains to trade facilitation in South and Central Asia, at 8 percent of GDP, are almost twice as large as the global average. High trade costs have contributed to South Asia being the least integrated region in the world.

FIGURE 1: Intra-regional trade share (percent of total trade), 2012

In the ASEAN region, most countries have established either Trade Information Portals or Single Windows that have enhanced trade facilitation, reduced trade costs and enhanced intra-regional trade. A Trade Information Portal allows traders to electronically access all the documents they need to obtain approvals from the government. A Single Window (a system that enables international traders to submit regulatory documents at a single location and/or single entity) allows for the electronic submission of such documents. These single windows, using international open communication standards, facilitate trade both within the region and with other countries using similar standards.

In services, one barrier to trade involves the movement of skilled workers, accountants, engineers and consultants who may move from one country to another on a temporary basis. The Southern Common Market (Mercosur)’s Residence Agreement allows workers to reside and work for up to two years in a host country. This residence permit can be made permanent if the worker proves that they can support themselves and their family.

Can land registration institutions be reformed in deeply entrenched bureaucracies?

Wael Zakout's picture
Turkey has radically transformed its land title registration system, and decreased the turnaround time for recording property transactions to just two hours.
Turkey has radically transformed its land title registration system, and decreased the turnaround time for recording property transactions to just two hours.
I just returned from Turkey where I visited the Turkish Tabu Cadastre Agency (Land Registration Agency of Turkey). The agency had changed so much that I did not recognize it.
 
I remember my first visit to the agency in 2007. The agency is heavily staffed (15,000), has more than 100 branches and its main headquarters had once almost fallen apart. In my first visit, the head of the agency gave me a nice surprise: he showed me a land book that dated back to the 18th century, and included a record of my great-great-grandfather’s land title in Palestine.
 
The head of the agency had great plans to transform the agency by improving land records, introducing computerization and integrating the system into the overall e-government program, and setting a time limit of one day to register land transactions. Based on that an ambitious reform agenda, we worked together over a few months’ ‘time to prepare the cadastre modernization project. The Bank partly financed this reform through a $100 million loan, while the Turkish government funded the rest of the program. The project started in 2007, and I moved on to other positions later that year.
 
This time I had a second surprise. The institution is completely transformed. The main office has been completely and beautifully renovated. It now resembles any other government office in the US or Europe. The agency presented its achievements. It was amazing to see what had been accomplished in 8 years. The government is about to complete the renovation of the cadastre and the computerization of all land records, including historical records from Ottoman times. Service delivery has improved dramatically, with property transactions now being registered within 2 hours. They also integrated cadastre registration into the overall e-government program, which allows any Turkish citizen to access the record of their land/property online. Above all, customer satisfaction has reached 97% — something unheard of for land agencies, often known to be among the most corrupt agencies in many countries.

From Tirole to the WBG Twin Goals: Scaling up competition policies to reduce poverty and boost shared prosperity

Anabel Gonzalez's picture
The role of policies that ensure and promote competition in the marketplace have moved to the forefront of economics and the development agenda. The Australian G20 presidency highlighted competition as one of the four policy areas for the growth agenda. India’s prime-minister Modi has placed competition on his transformational reform agenda, and The Economist recently emphasized the lack of competition as a source of low productivity among Latin American firms. Jean Tirole, who won the latest Nobel Prize for his analysis of market power and regulation, demonstrated how competition policies can spur powerful firms to become more productive and can give smaller firms more opportunity to thrive.

To respond to client demand at this crucial moment for economic development, the World Bank Group is generating knowledge to better understand the links among competition, growth and shared prosperity, and to develop policies that promote competition. Last week, at a Bank Group event, held jointly with the Organization for Economic Cooperation and Development (OECD), experts and practitioners discussed the growing body of empirical evidence on these matters. Representatives from the WBG’s client countries, in turn, shared how WBG competition policy tools are leveraging their development impact.

Competition in the marketplace matters for economic growth and household welfare for two reasons:
 
  • First, it fosters more productive firms and industries, allowing domestic firms to become more competitive abroad and to export more. A WBG study shows that substantially increasing competition in Tunisia would boost labor productivity growth by 5 percent.
  • Second, it protects poorer households from paying too much for consumer goods, and from missing out on the benefits of trade liberalization. In Mexico, lack of competition costs the poorest households 20 percent more than richest households. In Kenya, poverty could fall by 2 percent if competition was more intense in the maize and sugar markets.


Competition is restricted by businesses practices that undermine competitive dynamics. When firms agree to fix prices, empirical evidence reveals that consumers pay on average 49 percent more, and 80 percent more when cartels are strongest. Developing economies are still frequently marked by regulations that restrict the number of firms or limit private investment; rules that increase business risks and facilitate agreements among competitors; and rules that discriminate against certain competitors or affect competitive neutrality. When new retail firms are allowed to enter the market, real household income increases by 6.2 percent.

Weekly wire: The global forum

Roxanne Bauer's picture

World of NewsThese are some of the views and reports relevant to our readers that caught our attention this week.

Does talking about corruption make it seem worse?
The Guardian
What do most people immediately think of when you ask them why poor countries are poor? We’re pretty confident that it will be corruption. Whether you ask thousands of people in a nationally representative survey, or small focus groups, corruption tops people’s explanations for the persistence of poverty. Indeed, 10 years of research into public perceptions of poverty suggests that corruption “is the only topic related to global poverty which the mass public seem happy to talk about”.  Which is odd, because it’s the absolute last thing that people actually working in development want to talk about.
 
Africa’s moment to lead on climate
Washington Post
Climate change is the greatest threat facing humanity today. To avoid catastrophe, we must dramatically reduce the carbon intensity of our modern energy systems, which have set us on a collision course with our planetary boundaries. This is the challenge leading up to three key international events this year: a July summit on financing for new global development goals, another in September to settle on those goals and — crucially — a global meeting in December to frame an agreement, and set meaningful targets, on climate change. But focusing on ambitious global climate goals can mask the existence of real impacts on the ground. Nowhere is this truer than in sub-Saharan Africa.   No region has done less to cause climate change, yet sub-Saharan Africa is experiencing some of the earliest, most severe and most damaging effects. As a result, Africa’s leaders have every reason to support international efforts to address climate change. But these leaders also have to deal urgently with the disturbing reality behind Africa’s tiny carbon footprint: a crushing lack of modern energy.
 

Let love rule: Same-sex marriage in the U.S. and the world

Nicholas Menzies's picture

Celebration in front of the White House on
Friday, June 26.
By the World Bank Sexual Orientation and Gender Identity Taskforce*

This past Friday, June 26, 2015, the US Supreme Court issued an historic decision in favor of equality – recognizing the rights of same-sex couples to get married across the entire United States. This is a moment of personal joy for thousands of families but also a momentous declaration of what equal protection of the law means. As a global development institution, the World Bank has an international workforce that reflects the diversity of its member countries. We welcome this decision of the US Supreme Court - not only for the justice it brings to LGBT staff, but also because it exemplifies principles that are fundamental to inclusive and sustainable development.

Along with the recent referendum in Ireland, same-sex marriages are now performed or recognized in 24 countries across every region of the globe, except for most countries in Asia – from South Africa to Mexico; Argentina to New Zealand.

Why is marriage important? In the words of Justice Anthony M. Kennedy who wrote for the majority in the historic decision of the US Supreme Court, “No union is more profound than marriage, for it embodies the highest ideals of love, fidelity, devotion, sacrifice and family. In forming a marital union, two people become something greater than once they were. ” And through the institution of marriage, LGBT families become visible to the state, and thus entitled to receive the benefits and protections that come with such recognition.

However, the decision on Friday is bittersweet.

Progress in the US and elsewhere comes against a backdrop of continuing – and in some cases worsening – discrimination in many parts of the world. 81 countries criminalize some aspect of being LGBT. ‘Anti-gay propaganda’ laws have rekindled ignorance, fear and prejudice in too many countries, and in 10 countries you can legally be killed simply for being who you are.

Pages