India is the fastest-growing major economy in the world with significant Government investments in infrastructure. According to estimates by WTO and OECD, as quoted in a report from the United Nations Office on Drugs and Crime, India: Probity in Public Procurement, the estimated public procurement in India is between 20 and 30 percent of GDP.
This translates to Indian government agencies issuing contracts worth an estimated US$ 419 billion to US$ 628 billion each year for various aspects of infrastructure projects. Ideally, in contractual agreements no disputes would arise and both sides would benefit from the outcome. However, unexpected events occur and many contracts end in dispute. Contractual legal disputes devoid project benefits to the public as time and resources are spent in expensive arbitration and litigation. As a result, India’s development goals are impacted.
Law and Regulation
Performance budgeting (PB) has a deep and enduring appeal. What government would not want to allocate resources in a way that fosters efficiency, effectiveness, transparency, and accountability? However, such aspirations have proven poor predictors of how performance data are actually used.
The potential benefits of identifying and tracking the goals of public spending are undeniable, but have often justified a default adoption of overly complex systems of questionable use. Faith in PB is sustained by a willingness to forget past negative experiences and assume that this time it will be different. Without a significant re-evaluation, PB’s history of disappointment seems likely also to be its future.
Countries with large nonrenewable resources can benefit significantly from them, but reliance on revenues from these sources poses major challenges for policy makers. If you are a senior ministry of finance official in a resource-rich country, what are the challenges that you would face and Consider some of the issues that you would likely encounter:
For many resource abundant countries, large and unpredictable fluctuations in fiscal revenues are a fact of life. Resource revenues are highly volatile and subject to uncertainty. Fiscal policies will need to be framed to support macroeconomic stability and sustainable growth, while sensibly managing fiscal risks. Also, there is a question of how to decouple public spending (which should be relatively stable) from the short-run volatility of resource prices.
A significant percentage of government spending in India goes towards the creation of new infrastructure like the construction of roads, ports, railways and power plants. Construction contracts, however, often have a reputation for disputes and conflicts between contractors and governments. Such disputes ultimately delay implementation of the contracts and increase total costs, adversely impacting development outcomes of the projects.
Many countries have found that Dispute Boards offer an effective mechanism for resolving these issues in a timely and cost-effective manner. These boards, composed of one to three members, are set up upon commencement of a contract and help the involved parties avoid or overcome disagreements or disputes that arise during the contract’s implementation. The boards are less legalistic, less adversarial, less time consuming and less costly than options for resolving disputes within the legal system, including arbitration and litigation.
A 2004 study (PDF) shows that with an almost 99% success rate. The savings in using these boards are enormous: another study indicates that in almost 10% of projects, between 8% and 10% of the total project cost was legal cost.
In keeping with recent global trends in the procurement arena, the World Bank is transforming and modernizing its procurement framework.
In the private sector, companies have long viewed maximizing of supply chains as key to healthier bottom lines. In the public sector, many governments have been moving from overly rule-based procurement systems to systems that focus on performance and achievement of development goals.
I recently visited one of Bioversity International’s project sites in Begnas, where I met farming couple, Surya and Saraswati Adhikari. They proudly showed me around their biodiverse farm, pointing out some of the 150 plant species they grow and explaining that each one has a specific use. They showed me the vegetables, rice, gourds and legumes they grow to eat and sell; the trees that provide fruits, fodder and fuel, and the many herbs for medicinal and cultural purposes.
Many countries around the world are working to improve women representation in the government.
If you look at the data from the last 25 years to see which countries made significant progress to increase proportion of seats held by women in their national parliaments, these three countries will stand out!
Rwanda, Bolivia and South Africa! See the chart below.
On this International Women’s Day, let’s quickly look at how these countries increased the proportion of women in parliaments.
, according to the Inter-Parliamentary Union. Today, 25 years later, 64% of parliament is occupied by women.
1. Corruption is not only about bribes: People especially the poor get hurt when resources are wasted. That’s why it is so important to understand the different kinds of corruption to develop smart responses.
2. Power of the people: Create pathways that give citizens relevant tools to engage and participate in their governments – identify priorities, problems and find solutions.
3. Cut the red tape: Bring together formal and informal processes (this means working with the government as well as non-governmental groups) to change behavior and monitor progress.
We know corruption in developing countries affects poor people the most. It also impacts firms in many ways.
Crises in access to water are making headlines around the world. Among difficult policy pathways to respond, convincing people to change their behavior and reduce their consumption can be one of the hardest.
This post gives us a promising picture from Belén, a small town in Costa Rica. Of Belén’s 21,633 inhabitants, 99.3% have access to water service, but shortages are anticipated by 2030. Our recent study demonstrated that the government could cheaply encourage citizens to save water by enabling them to compare their consumption with that of their peers.
This is a timely lesson, as the United Nations estimates that more than two-thirds of the world’s population will live in water-stressed regions by 2025. Demographic and economic pressures make water management an increasingly urgent policy priority even in water rich areas like Latin America, home to nearly 31% of the world's freshwater resources.
While Costa Rica is relatively well-endowed with water resources, current demand virtually matches production capacity Risks of water deficits and existing shortages are heightened by overdevelopment of areas with limited water supply. To help address these challenges, we partnered with local authorities in the small municipality of Belén to conduct a randomized control trial, capturing an innovative approach that can help conserve water across the country, and in similar contexts around the world.
The project built on insights from the growing field of behavioral economics, which challenges the underlying, intentionally simplified assumption of standard models: that people make rational decisions based on a self-interested cost-benefit analysis. Behavioral economics borrows from other sciences to consider the full scope of social and psychological influences on human decision-making.