Finance, Competitiveness, and Innovation in Focus

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The series captures the experience, innovative approaches and solutions for development of the World Bank Group covering financial sector topics of relevance to both the public and private sectors. The series is comprised of short knowledge notes, policy notes, case studies, lessons learned or a combination therein. This series was formerly known as Finance in Focus.

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    Policy Options to Mitigate Political Risk and Attract FDI
    (World Bank, Washington, DC, 2020-08-12) Kher, Priyanka ; Chun, Dongwook
    Political risks covers a wide range of issues, and this note focuses on a subset of political risk: the risks that arise from government actions, whether political or regulatory, that can affect the profitability of an investment in a foreign country. Policies adopted and implemented by governments can directly mitigate these risks. Bad governance and economic crises are two big drivers of political risk. Both are currently prevalent globally, but especially in developing countries. The purpose of this note is to summarize how political risk caused by government actions can impact foreign investment, and what tools countries can use to manage and mitigate such risks.
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    Less Burden, More Transparency, and Higher Quality: Electronic System for Business Safety Inspections in Peru
    (World Bank, Washington, DC, 2020-07-21) Barron, Manuel ; Bedoya, Guadalupe ; Garcia Montufar, Diego ; Goicoechea, Ana
    Business safety inspections are commonly cited as one of the most important bureaucratic barriers to doing business around the developing world (World Bank 2019, 2020). In Peru, the business safety inspection system is characterized by low compliance with established norms, misaligned incentives and high transaction costs. These inefficiencies affect micro, small, and medium enterprises (MSMEs) disproportionally, as they do not have the resources or know-how to navigate the inspection procedures. MSMEs constitute 99.5 percent of firms, employ up to 89 percent of the population, and contribute up to 31 percent of gross domestic product (GDP) in the country (Ministry of Production 2017). Thus, the inefficiencies in the inspection system hamper the business environment, adversely affecting shared prosperity and economic growth. The World Bank Group is conducting a rigorous impact evaluation study in collaboration with the Ministry of Housing of Peru.1 Specifically, it will assess how the deployment of an electronic system for inspections, in combination with the improved monitoring of inspector performance and optimized firm auditing, can be used to address key constraints in the inspection system. This work will shed light on whether these mechanisms can reduce the compliance burden on firms by improving regulatory efficiency while also ensuring safety. In addition, it will provide evidence about how such systems could operate when implemented at scale. This note provides an overview of the policy problem that Peru faces, and describes the solutions to be tested. It then focuses on lessons from developing and implementing the electronic system to solve the policy problem, with an emphasis on those lessons related to the constraints and inputs to improving regulatory efficiency and accountability.
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    Azerbaijan: Leveraging Postal Network for Financial and Social Inclusion
    (World Bank, Washington, DC, 2016-04) Prigozhina, Angela ; Boon, Johannes
    This paper provides a brief overview of the postal network reform in Azerbaijan and transformation of Azerpost, Azerbaijan’s state postal operator, into an efficient platform for basic financial services delivery throughout the country. This complex reform, supported by the World Bank loan for Financial Services Development Project and the grants from the Swiss Office of International Cooperation (SECO), was launched in 2006 and helped the government of Azerbaijan to improve financial services delivery and inclusion in the country in parallel with modernizing and digitalizing Azerpost, expanding its financial services delivery capacity, enhancing its financial viability and maximizing the public value of Azerpost extensive branch network of 1,600 offices. In the period of 2007-1H2015, Azerpost total revenues, largely from financial services (as universal postal services remain loss-making) tripled, while volume of financial services’ sales increased four times. In 2015, Azerpost reached financial breakeven without state subsidy, and productivity of its staff increased 3 times. In 2009, Azerpost corporatized and became LLC, while in 2010, based on the new postal legislation, it was licensed as a non-bank financial institution subject to prudential supervision of the central bank.