Finance, Competitiveness, and Innovation in Focus

26 items available

Permanent URI for this collection

https://hdl.handle.net/10986/24198

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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Re-thinking the Approach to Informal Businesses: Typologies, Evidence and Future Exploration
(World Bank, Washington, DC, 2020-11-18) Marusic, Andreja; Nielsen, William; Ghossein, Tania; Solf, Sylvia
Interventions to incentivize business formalization over the past decades have shown mixed results (Bruhn and McKenzie, 2013; Bruhn and McKenzie, 2018; Floridi et al., 2019) and brought limited knowledge on how to address informality in a systematic way. Adding to the challenge is determining whether informality should be a direct target, or is rather something indirectly impacted through development, improved governance, better regulation and improved public services (Loayza 2016; Loayza, 2007; Perry et al., 2007; World Bank, 2009). The informal sector includes businesses, workers, and activities operating outside the legal and regulatory systems (Loayza 2016). The scale of the informal sector in emerging and developing economies, which accounts for 25 to 40 percent of GDP and often more than 60 percent of employment (World Bank 2020), merits rethinking approaches to formalization. To support greater rates of formalization, this note proposes four specific areas for further research and pilot interventions: 1) supporting informal clusters, 2) providing support to informal businesses without a target of formalization, 3) simplified, intermediate and temporary legal statuses of informal businesses to better align with business needs and government goals, and 4) understanding behavioral insights that influence businesses’ decisions to inform policymaking.
Barriers to Competition in Product Market Regulation: New Insights on Emerging Market and Developing Economies
(World Bank, Washington, DC, 2020-10-08) Dauda, Seidu; Drozd, Maciej
Reforms to foster competition in product markets have been shown to improve productivity and support economic growth in advanced economies (AEs). However, relatively little is known about restrictions to competition in emerging market and developing economies (EMDEs). We fill this gap by comparing product market regulations across 33 AEs and 37 EMDEs using standardized indicators developed by the Organization for Economic Co-operation and Development and collected jointly with the World Bank Group. Product market regulations are found to be more restrictive and more variable in EMDEs than in AEs. Most variation among countries can be attributed to differences in sector policies. This analysis allows policy makers to identify areas for reform and prompts policy researchers to investigate the links between product market regulation and economic development in EMDEs.
Attracting Foreign Direct Investment into Tunisia through Outreach Campaigns
(World Bank, Washington, DC, 2020-09-01) Sabha, Yassin; Hamden, Mouna; Heilbron, Armando
After the Arab Spring, Tunisia urgently needed to create productive jobs and economic opportunities for its young population. Attracting foreign direct investment (FDI) in priority sectors was a key pillar of the Government’s strategy to deliver this job agenda. With the support of the World Bank Group, the Investment Promotion Agency of Tunisia engaged in proactive outreach campaigns which resulted in 21 investment leads and three announced FDI projects, including a manufacturing plant by Japan’s Sumitomo. This case study shows that well-planned and executed investor outreach campaigns can lead to concrete investment results and contribute to a country’s development objectives. It provides key success factors useful to other countries wanting to engage in outreach. More than ever before (in a post-COVID-19 world), outreach can play a key role for countries in their efforts to reposition and take advantage of new investment opportunities from near shoring and emerging sectors. The paper provides examples of IPAs continuing their outreach efforts virtually by leveraging technology.
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.
Promoting E-Commerce in Georgia: Exploring Constraints to Online Participation using Baseline Data from an Experimental Study
(World Bank, Washington, DC, 2020-07-24) Apedo-Amah, Marie Christine; Coville, Aidan; Piza, Caio; Raja, Siddhartha; Scarpari, Raquel
E-commerce has the potential to expand market opportunities for businesses. However, it is not guaranteed. The World Development Report on Digital Dividends (World Bank 2016) highlights the importance of complementary analog support that may be needed to ensure people and businesses are able to fully benefit from the opportunities that high-speed, ubiquitous internet can provide. The first step in providing such support is understanding the constraints to adoption. The Competitive Policy Evaluation Lab (ComPEL) is supporting an impact evaluation in Georgia to generate knowledge about the constraints that prevent firms from participating in e-commerce platforms, while also testing an innovative approach to address the identified issues. The study evaluates the ‘Broadband for Development’ (BfD) project, a component of the World Bank-supported Georgia National Innovation Ecosystem (GeNIE) program, that aims to foster innovation, particularly for otherwise marginalized firms. The BfD provides support to Micro, Small and Medium Enterprises (MSMEs) located outside of the capital, Tblisi, to adopt broadband connections and establish an online retail presence through e-commerce training. Before BfD launched this effort, the research team collected and analyzed baseline data regarding 2,180 eligible firms. The purpose of this note is to explore the baseline results and some implications for BfD, or similar projects supported by the World Bank’s Finance, Competitiveness and Innovation (FCI) Global Practice, within the context of the impact evaluation.
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.
Foreign Direct Investment, Backward Linkages, and Productivity Spillovers: What Governments Can Do to Strengthen Linkages and Their Impact
(World Bank, Washington, DC, 2020-05-01) Jordaan, Jacob; Douw, Wim; Qiang, Christine Zhenwei
This note provides an up-to-date summary of the academic evidence around the drivers and channels for technology transfer and productivity spillovers by multinational corporations (MNC) operating in host economies. Foreign direct investment (FDI) is a major contributor to development. Besides the direct benefits FDI brings in terms of increased capital, employment and exports, the presence and operations of MNCs can also help improve the productivity of local firms through backward linkages and offer an important channel for the integration of local firms into global value chains (GVC). However, several market failures exist that get in the way of these linkages and spillovers fully materializing. This note highlights the main challenges as well as some policy recommendations for host economy Governments to consider.
Strengthening Service Delivery of Investment Promotion Agencies: The Comprehensive Investor Services Framework
(World Bank, Washington, DC, 2020-03) Heilbron, Armando; Aranda-Larrey, Yago
Research shows that investment promotion agencies (IPAs) may be the best public institutions to meet government objectives for attracting, establishing, retaining, expanding, and linking productive private investment. As part of this, IPAs need to provide relevant, high-quality services to investors at different stages of the investment life cycle. Informed by its research and experience in global operations, the World Bank Group introduces the Comprehensive Investor Services Framework (CISF), a catalog of specific services to meet investor needs. IPAs can use this investor-centric framework to design service offerings in line with their strategic focus and promotion capacity.
Institutions for Investment: Establishing a High-Performing Institutional Framework for Foreign Direct Investment
(Washington, DC: World Bank, 2019-12-31) Heilbron, Armando; Whyte, Robert
A well-functioning institutional framework can result in higher levels of foreign direct investment. It requires several factors such as a shared strategic vision, solid institutions capable of delivering on their specific mandates and collaborating beyond their walls, and a strong political and financial support for all. The note describes key government functions for investment, suggests a process and principles for creating optimal institutional structures to deliver them, and provides examples. In particular, it examines the role of investment promotion agencies (IPAs) the agency usually tasked with operationalizing government FDI goals as well as the dilemmas that governments face in the context of institutional specialization versus function consolidation.
How Countries Can Fully Implement the New York Convention: A Critical Tool for Enforcement of International Arbitration Decisions
(World Bank, Washington, DC, 2019-12-30) Forneris, Xavier; Mocheva, Nina
The year 2018 marked the 60th anniversary of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, the most important international convention in the area of international commercial arbitration. The Convention is also said to be the most successful international treaty in the area of private international law. This note primarily targets policy makers and their legal advisors in countries looking at ways to improve their business environment, to become more attractive locations for trade and investment, through better dispute resolution options for international transactions. First, the note explains that international commercial arbitration, as part of countries' legally recognized dispute resolution options, is critical to cross-border contract enforcement. As countries strengthen their international arbitration regimes, they improve their competitiveness in international markets and increase investment and trade by reducing transaction risks and the cost of new infrastructure projects. Countries can improve their international commercial arbitration systems by passing modern legislation consistent with international best practice, ratifying international arbitration conventions, strengthening judicial capacity to enforce arbitral awards, and investing in local arbitration centers.