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Private Sector Development

Making cities competitive – What will it take?

Megha Mukim's picture



Cities are the future. They are where people live and work. They are where growth happens and where innovation takes place. But they are also poles of poverty and, much too often, centers of unemployment.

How can we unleash the potential of cities? How do we make them more competitive? These are urgent questions. Questions, as it turns out, with complex answers – that could potentially have huge returns for job creation and poverty reduction.

Cities vary enormously when it comes to their economic performance. While 72 percent of cities grow faster than their countries, these benefits do not happen uniformly across all cities. The top 10 percent of cities increase GDP almost three times more than the remaining 90 percent. They create jobs four to five times faster. Their residents enjoy higher incomes and productivity, and they are magnets for external investment.
 
We’re not just talking about the “household names”among global cities: Competitive cities are often secondary cities, many of them exhibiting success amidst adversity – some landlocked and in lagging regions within their countries. For instance, Saltillo (Mexico), Meknes (Morocco), Coimbatore (India), Gaziantep (Turkey), Bucaramanga (Colombia), and Onitsha (Nigeria) are a few examples of cities that have been competitive in the last decade.
 
So how do cities become competitive? We define competitive cities as those that successfully help firms and industries create jobs, raise productivity and increase the incomes of citizens. A team at the World Bank Group spent the last 18 months investigating, creating and updating our knowledge base for the benefit of WBG’s clients. In our forthcoming report, “Competitive Cities for Jobs and Growth,”* we find that the recipe includes several basic ingredients.

In the long term, cities moving up the income ladder will transform their economies, changing from “market towns” to “production centers” to “financial and creative centers,” increasing efficiencies and productivity at each stage. But economic data clearly shows there are large gains to be had even without full-scale economic transformation: Cities can move from $2,500 to $20,000 in per capita income while still remaining a “production center.”  In such cases, cities become more competitive at what they already do, finding niche products and markets in tradable goods and services. Competitive cities are those that manage to attract new firms and investors, while still nurturing established businesses and longtime residents. 
 
What sort of policies do competitive cities use? We find that leading cities focus their energies on leveraging both economy-wide and sector-specific policies. In practice, we see how successful cities create a favorable business climate and target individual sectors for pro-active economic development initiatives. They use a combination of policies focused on cross-cutting issues such as land, capital markets and infrastructure, while not losing focus on the needs of different industries and firms. The crucial factor is consultation, collaboration and partnerships with the private sector. In fact, success also involves building coalitions for growth with neighbors and other tiers of government.

Voice from the field: how can we help the Caribbean fulfill the promise of PPPs?

Brian Samuel's picture
From Sept. 29 to Oct. 1, 2015, our first “PPP Boot Camp” was held in Barbados. This is the first of the boot camp-style workshops we are delivering to Caribbean government officials to help them increase technical capacity in public-private partnerships. The boot camp series aims to offer the depth and breadth that’s been missing from the PPP market in the Caribbean.

Five challenges prevent financial access for people in developing countries

Gloria M. Grandolini's picture


Financial products must be adapted to women’s needs, like enabling them to open their own account or improving their financial literacy. Photograph: World Bank Photo Collection

Two billion people worldwide still lack access to regulated financial services. Despite significant progress and the increased technical and financial resources devoted to financial inclusion, much work remains ahead.
 
There is broad consensus that access to a transaction account can help people better manage their life and plan for emergencies.

But financial access and the underlying financial infrastructure taken for granted in rich countries, such as savings accounts, debit cards or credit as well as the payment systems on which they operate, still aren’t available to many people in developing countries. This past September, I participated in the Global Policy Forum of the Alliance for Financial Inclusion (AFI) held in Mozambique.  This annual meeting convened policymakers, the private sector and other stakeholders to assume new commitments, discuss best practices and agree on the way forward.

Islamic finance: Strong standards of corporate governance are a 'sine qua non'

Nihat Gumus's picture



Proper corporate governance practices in financial institutions should provide added value by enhancing the protection of depositor and investor rights, facilitating access to finance, reducing the cost of capital, improving operational performance, and increasing institutions’ soundness against external shocks. Ensuring strong corporate governance standards is thus essential to the stability and health of all financial institutions, worldwide.
 
Good governance is an important priority for Islamic finance, an aspect of international finance that has enjoyed a stage of significant growth over the past decade. The volume of financial assets that are managed according to Islamic principles has a value of around $2 trillion, having experienced a cumulative average annual growth rate of about 16 percent since 2009 (Graph 1).

Graph 1: The Size of Islamic Finance Assets (USD Billion)


 
Banking has traditionally been the leading sector in the realm of Islamic finance, but the share of other products and institutions within the total realm of Islamic financial assets has been steadily increasing,  as well (Graph 2). For instance, the Sukuk sector – which focuses on securitized asset-based securities – has seen considerable growth over the past six years and, as of 2014, amounted to more than $300 billion. Similar momentum is driving the growth of the Islamic Funds and Takaful (Islamic insurance) sectors. From 2009 to 2014, the assets under management of Islamic Funds has increased from about $40 billion to about $60 billion, while the amount of total gross contribution to Islamic insurance has surged from $7 billion to more than $14 billion.

Graph 2: The Size of Islamic Finance Assets by Sector 2014 YE (%)


 

"Every time I see a problem, I create a social business to solve it"

Marta Milkowska's picture

(c) Marta Milkowska“Every time I see a problem, I create a social business to solve it,” renowned Nobel Prize laureate Muhammad Yunus said to an overflowing room at the World Bank Group’s Headquarters in Washington, DC this summer. “Set up a social business.”

“The poor are like Bonsai trees,” the founder of Grameen Bank explained, “When you plant the best seed of the tallest tree in a six-inch-deep flower pot, you get a perfect replica of the tallest tree, but it is only inches tall. There is nothing wrong with the seed you planted; only the soil-base you provided was inadequate. Poor people are bonsai people. There is nothing wrong with their seeds. Only society never gave them a base to grow on."

The sunny side of PPPs: Rooftop solar, public-private partnerships, and the promise of a brighter future

John Kjorstad's picture
In 1899 American Ada Blenkhorn—inspired by a disabled nephew—wrote the popular folk song Keep On the Sunny Side. As legend would have it, Blenkhorn’s nephew always wanted his wheelchair pushed down the “sunny side” of the street. Not for the first time, sunshine was linked to optimism and the lyric stuck with working-class audiences.

Exploring the nexus between trade policy and disaster response

Selina Jackson's picture
 Nugroho Nurdikiawan Sunjoyo/World Bank


Strong trade connectivity can help disaster response and recovery by ensuring that humanitarian relief goods and services get to where they are needed when disaster strikes.  Trade policy measures, however, can sometimes have adverse effects.  Research led by the World Bank highlights that a common complaint of the humanitarian community is that customs procedures can delay disaster response, leaving life-saving goods stuck at borders.  Other measures such as standards conformity procedures, certification processes for medicines, and work permits for humanitarian professionals can slow the delivery of needed relief items.  Border closures can exacerbate situations already marked by human tragedy and unlock   full-scale economic crises. 
 
This nexus between trade policy and humanitarian response was discussed at an event organized jointly by the International Federation of the Red Cross and Red Crescent Societies (IFRC), the World Bank Group and World Trade Organization at the 5th Global Review of Aid for Trade on June 30 in Geneva.  Among the steps suggested to address concerns were rigorous disaster planning; better coordination between humanitarian actors, implementation of the WTO's Trade Facilitation Agreement and better recognition of the role of services.  

Unleashing private investment in renewable energy

Korina Lopez's picture
Angus McCrone, Jin-Yong Cai, and Rune Bjerke discuss renewable energy. © Franz Mahr/World Bank


More than 700 million people live in extreme poverty around the world. If that number seems daunting, then consider this: 1.1 billion people – more than three times the population of the United States – live without electricity.

So it goes without saying that ending energy poverty is a key step in ending poverty itself. And world leaders agree – a sustainable development goal just for energy was adopted last month. It emphasizes the role of renewable energy in getting us to the finish line of reaching sustainable energy for all by 2030. What will give us a big boost in that race? Private financing.

The secret to India's success on rooftop solar PPPs? Satisfying stakeholders' needs

Pankaj Sinha's picture
When our team at IFC got the mandate in 2010 for a PPP to set up a 5MW grid connected solar rooftop (SRT) in Gandhinagar (Gujarat, India), some thought that the project was too small to make a difference.

Raise your PPP IQ

Tanya Scobie Oliveira's picture
Throughout history, people have recognized the power of the sun to improve peoples’ lives. In India, and in households and business throughout Gujarat state in particular, that idea lives on in a brand-new incarnation: rooftop solar panels.  The newest edition of Partnerships IQ, “Rooftop Solar Public-Private Partnerships:

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