Development Policy Review

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  • Publication
    Egypt - Development Policy Review
    (Washington, DC, 2008-05) World Bank
    This development policy review finds ample evidence that Egypt has prospered as a consequence of giving the economy a greater market orientation. While favorable global conditions have helped, the structural changes over the last two decades have been an essential ingredient for Egypt's success. Productivity has risen more in segments of the economy where the private sector s share in investment and output grew most. Empirical estimates done for this report suggest that each dollar of private investment contributed four times more to output than a dollar of public investment, reflecting in part the poor choice and maintenance of public investment. Consequently, further increases in output, incomes and productivity may be expected from the recently rising share of private investment in the total. Public sector productivity has also increased in recent years, reflecting in part the increased importance of state owned firms in petroleum and natural gas. Egypt's economic growth is also now more closely correlated with that of the Organization for Economic Co-operation and Development countries magnified by a factor of 1.25, and volatility has declined. This results from many links, not just the direct effect of oil and gas.
  • Publication
    Philippines : Invigorating Growth, Enhancing Its Impact
    (Washington, DC, 2007-05) World Bank
    Major fiscal adjustment during 2005-06, aided by abundant global liquidity, has turned around market sentiment on the Philippines. Stocks, the peso and reserves have all risen significantly, as have foreign direct investment and portfolio inflows, while interest costs and spreads for government borrowing have fallen along with inflation. Real GDP grew by 5.4 percent in 2006 and real GNP by 6.2 percent, marking the first time that three consecutive years of growth of 5 or more percent was recorded since the 1970s. Strong growth in business process outsourcing, electronics exports and remittance-driven consumption served as important props for higher growth. This paper includes the following headings: recent economic developments; how robust is present growth; invigorating growth, enhancing its impact; and maximizing the benefits of growth for the poor.
  • Publication
    Vietnam Business : Vietnam Development Report 2006
    (Washington, DC, 2005-11) World Bank
    Business development has been one of the main forces behind rapid poverty reduction in Vietnam. Together with the redistribution of agricultural land, and the broad coverage of social services, it allowed a large fraction of the population to engage in more productive occupations and raise their living standards. But businesses are still struggling with important constraints. Insufficient availability of finance, difficulties in accessing land and continuous gaps in infrastructure services (in spite of enormous investment efforts) are among the most important obstacles identified by entrepreneurs. In a booming labor market, retaining qualified personnel and finding the skills required to move up the ladder are also perceived as barriers to business development. As a result of these constraints, the domestic private sector remains dominated by small enterprises. In between a myriad household businesses and a few thousand large state-owned enterprises (SOES) and foreign companies, there are not many small and medium enterprises, and only a handful of domestic private firms have made it to the top. Sustaining business development in Vietnam requires the completion of the structural reform agenda. Fully developing the land market, restructuring the financial sector, managing state assets in a more efficient and transparent manner, mobilizing resources for infrastructure development, are the key priorities in this respect. Further integration with the world economy, especially through the accession to the World Trade Organization, is bound to lock-in some of these changes, and level the playing field between domestic and foreign enterprises. But there i s also a complementary reform agenda, aimed at leveling the playing field between the domestic private sector and SOEs and mobilizing capital (both public and private) in an efficient way. Global integration and domestic reforms are needed to sustain rapid economic growth while avoiding the accumulation of large contingent liabilities for the government. For Vietnam to become a middle-income country will entail going beyond structural reforms and laying the foundations of a modern market economy, introducing competition and proper regulation in infrastructure services, modernizing tax administration, reforming the legal and judiciary systems, reducing corruption, improving governance at local levels, are all part of a second generation of reforms that need to be put on track for Vietnam to move up to the next phase.
  • Publication
    Chile - Zonas Extremas Policies and Beyond : An Assessment of Costs and Impact with Recommendations of Avenues for Policy Reform
    (Washington, DC, 2005-10) World Bank
    In Chile, certain areas have historically been identified as Extreme Zones - Zonas Extremas (ZE) and qualified as such, have received special treatment in terms of public policies. Most of the exception instruments that currently benefit the ZE were created more than 20 years ago, and have followed an incremental dynamic, not based on impact assessments. This has generated a wide range of benefits, some of doubtful effectiveness and efficiency, with significant fiscal costs, and with diverse objectives that are not necessarily consistent. In addition, Chile has experienced considerable change since these policies were established, altering the conditions that initially justified some of them. Among the changes are greater decentralization, greater democratization - both at the national and local levels - opening and internationalization of the economy, social progress, and development of human capital. This study intends to develop guidelines for a comprehensive regional development policy for balanced long-term, and equitable growth, both at the interregional level-encompassing all the regions-and at the population level-with emphasis on targeting public efforts to the poorer population. Thus, the study will contribute to estimate the fiscal cost of the pro-ZE policies; to evaluate the effectiveness and efficiency of current ZE policies; and, to propose guidelines for a comprehensive regional development policy. To this end, the study pursues specific objectives: characterization and discussions on the qualification of ZEs; analysis of the consistency of current ZEs public policies; scaling of fiscal expenditure (subsidies) and tax-related (exemptions) that such policies imply; qualitative evaluation of its performance in terms of declared objectives; quantitative evaluation of performance in terms of economic and social impact; determination of effectiveness and efficiency; identification of best practices and international instruments in achieving similar objectives; and, proposal of guidelines for the reformulation, elimination and creation of instruments.
  • Publication
    Madagascar : Development Policy Review, Sustaining Growth for Enhanced Poverty Reduction, Volume 1, Main Report
    (Washington, DC, 2005-05) World Bank
    The country's approach to poverty reduction is outlined in the 2003 Poverty Reduction Strategy Paper, and draws on a development approach in which growth and poverty reduction are mutually reinforcing. Three areas of focus are identified in the PRSP: (1) restoration of law and improvements in governance; (2) promotion of broad-based growth; and (3) promotion of systems for establishing human and material security. The DPR presents Madagascar's development policy agenda in an integrated framework within which issues of policy consistency, priorities, and sequencing could be addressed. This DPR focuses on growth and growth strategy. It highlights the main structural and institutional impediments to achieving sustained growth and the factors constraining the ability of the poor to participate in economic growth. Emphasis is put on issues and sectors that contribute directly to growth: private sector development issues, including the availability of credit; elements of competitiveness such as infrastructure and education; and issues in sectors considered sources of growth. While the impact of government policy on poverty i s most directly felt through public expenditure and service delivery, these are dealt with in great detail in the accompanying PER, and will only be touched upon here in the context of government's growth strategy. Finally, the DPR identifies the main sources of vulnerability of the country.
  • Publication
    Philippines : From Short-Term Growth to Sustained Development
    (Washington, DC, 2005-04) World Bank
    After reviewing the more promising recent developments, this report examines the nature of growth and development in the Philippines from a longer-term perspective and the factors that may have inhibited performance. It concludes that political instability has undermined the beneficial impact of the reforms implemented, and that such instability itself has been rooted in governance failures. Moreover, weaknesses in public institutions and corruption have also directly undermined a range of development objectives. Reconstructing the social contract in the Philippines is a challenge. Key pillars of this strategy discussed in the report include: reducing fiscal vulnerabilities; improving the climate for private investment; and improving public sector performance and governance. The interdependence of these elements as part of a strategy to rebuild the social contract is discussed and the report elaborates on improving the delivery of basic services.
  • Publication
    Sri Lanka : Development Policy Review
    (Washington, DC, 2004-12-08) World Bank
    This report provides an integrated view of Sri Lanka's long term development challenges for sustainable growth and poverty reduction. Sri Lanka's substantial achievements in human development are well known. In several dimensions - such as universal primary enrollment, gender equality, infant and maternal mortality - the country is well positioned to meet the Millennium Development Goals (MDGs). In addition, housing conditions have substantially improved, relative to the early 1980s, in particular with respect to housing materials and access to electricity, safe water and sanitation facilities. However, despite improved overall access to basic services, large disparities remain in the access to, and quality of most of these services. Of particular concern is the fact that poverty reduction has been slow, while income inequality has risen in recent years. The disappointing trend in national poverty incidence also reflects a long-term growth performance significantly below the country's potential. The core theme of this report is thus the following: Sri Lanka must achieve a higher growth rate, but do so in a manner that poor people, and the poor regions of the country can more fully participate in this growth. The report further analyzes early reforms and their impact, as well as that of private sector participation. However, despite the increased role of the private sector, little progress was made in fundamentally redefining the role of the state, partly owing to Sri Lanka's strong attachment to a large public sector. An important message of this report is that much of Sri Lanka's skewed growth record and ensuing increased income inequality, spanning through alternate governments, is a reflection of the unfinished reform agenda. Recommendations suggest improved public financial management, including public debt reduction, and the rationalization of public spending, linking it to the poverty reduction strategy. In addition, the performance of state-owned enterprises should be improved, followed by fiscal consolidation and adequate tax policies. Policies for export growth should be accelerated, pursuing a competitive real exchange rate, and avoiding trade policy reversals, but it is also important to note that preferential trade liberalization, i.e., access to markets cannot substitute for needed improvements in labor productivity, lead time, and cost effectiveness. The report also focuses on the importance of the impacts from agricultural development, infrastructure development, and certainly the impacts of improved education and health.
  • Publication
    Republic of Tunisia - Development Policy Review : Making Deeper Trade Integration Work for Growth and Jobs
    (Washington, DC, 2004-10) World Bank
    Given a steady pace of structural reforms, and sound macroeconomic management, Tunisia experienced a fast, and sustained growth. However, while forward-looking policies helped preserve external and internal balances, challenges remain in the context of a volatile external environment. High and pro-poor growth, contributed to a sharp reduction in poverty in the second half of the 1990s, yet, despite strong growth, unemployment remains high, at around 15 percent, partly reflecting demographic pressures, and partly the decrease in the employment intensity of growth. Moreover, weaknesses in economic governance, in particular regarding the predictability, and transparency of the regulatory framework, and market contestability, may be an important constraint to private investment. Tunisia faces a turning point where, unless coordinated efforts to improve the quality of economic governance, and stimulate private investment are placed at the core of the reform agenda, the deeper engagement with the world, may not fulfill its development promise. Policies will be needed to make Tunisia's deeper trade integration work for growth, and jobs: Strengthening the investment climate, by improving economic governance; Improving the functioning of the labor market; Strengthening the soundness of the banking system and fostering the development of securities markets; Securing a robust medium-term fiscal framework; Enhancing the efficiency of education policies; Strengthening the effectiveness and sustainability of social sector policies; Lowering transactions costs for business entry, operation, and exit; Enhancing transparency and predictability of the regulatory framework; Enhancing market contestability, by reducing barriers to entry in key infrastructure services - and by strengthening competition policy - furthering Tunisia's international trade integration. The Tunisian banking sector has better room for dynamic growth, thanks to a gradually reduced government ownership, in spite of high non performing loans. Education is one of the principal pillars of Tunisia's strategy for development, as it aims to build the human capital necessary to compete in the global knowledge-based economy.
  • Publication
    Indonesia Development Policy Report : Beyond Macroeconomic Stability
    (Washington, DC, 2003-12-04) World Bank
    The year 2004 will mark another crucial step in Indonesia's long-term transition. The country will go to the polls to elect new national and regional Parliaments, and for the first time in the history o f the Republic, to directly elect a President. This milestone in the country's democratization is accompanied by one in economic policy: for the first time since the onset o f the crisis, the Government will not have a program supported by the IMF. The Government's decision to graduate from its IMF program is warranted by the strong improvements in the country's macroeconomic conditions, and has been broadly welcomed by the markets and the international community. The Government's "Economic Policy Package Pre and Post IMF" or White Paper, issued as a presidential instruction on September 15th has helped build confidence in the Government's policies in the election year ahead. The policy package is intended to "bridge the credibility gap." The White Paper is a unique document: it is the first time that the Government commits itself transparently to a time-bound action plan to implement policies. The document shows continuity in macroeconomic policies and financial sector reforms, but also proposes a set of specific policy and institutional measures to address issues that have undermined the country's investment climate. While the timetable for adopting these measures is a short term one - fifteen months - many o f the proposed measures address fundamental longer term problems, and some will take several years to see through fully. The private sector, which has a high " stake in the measures included in the paper, has emerged as an independent monitor of progress. Since the White Paper is so central to Indonesia in the year ahead, much of this brief is devoted to discussing it. Beyond recent developments, the report discusses and analyzes critical policy actions from the White Paper. The report also points at the White Paper measures that may not necessarily be in line with the stated goals of the document. And finally, the report identifies policies that are needed beyond the White Paper to ensure Indonesia builds on the macroeconomic stability achieved to attain more rapid growth and poverty reduction.
  • Publication
    Philippines : Development Policy Update
    (Washington, DC, 2003-10-16) World Bank
    The Philippines has achieved reasonable economic growth of about 4 percent per annum over the past two years, in spite of adverse global developments, sporadic conflict in Mindanao, political uncertainty and investor concerns regarding fiscal sustainability. The economy has been particularly resilient in view of concerns regarding fiscal management and the limited recovery in investment since the 1997 Asian financial crisis. The persistent low levels of investment - below 20 percent of GNP compared with about 23 percent in the early to mid 1990s - raises concerns about future growth. In recent years it has been consumption rather than investment that has underpinned growth, and this cannot continue indefinitely. Sustained geographically dispersed economic growth and relatively stable prices have resulted in a decline in poverty. Both the public and private sector will need to contribute for the Philippines to more fully achieve its development objectives. Three issues are central to improved public sector performance - fiscal management, off-budget losses and contingent liabilities, and governance. Mindful of the Philippines' relatively poor competitiveness and that growth, employment creation and poverty reduction depend critically on private sector performance, this update focuses on three key investment issues - infrastructure, the financial sector, and competition.