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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Publication Institutions for Investment: Establishing a High-Performing Institutional Framework for Foreign Direct Investment(World Bank, Washington, DC, 2021-02-18) Heilbron, Armando; Whyte, RobertA 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.Publication Risk-Based Approaches to Business Regulation: A Note for Reformers(World Bank, Washington, DC, 2020-10-22) Molfetas, Aris; Grava, LarsGovernments increasingly use risk-based regulation (RBR) to adapt their degree of regulatory control to the actual risks posed by industry sectors, economic activities, and business establishments. Risk-based regulation aims to protect public goods, such as safety, health, and the environment, while at the same time avoiding unnecessary burdens on businesses. When designing regulation and developing models for monitoring and enforcement, risk guides assessments of costs and benefits. This note presents reformers and practitioners with the highlights of an approach to implementing a risk-based regulation system.Publication Policy Options to Mitigate Political Risk and Attract FDI(World Bank, Washington, DC, 2020-08-12) Kher, Priyanka; Chun, DongwookPolitical 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.Publication Evaluating the Costs and Benefits of Corporate Tax Incentives: Methodological Approaches and Policy Considerations(World Bank, Washington, DC, 2020) Kronfol, Hania; Steenbergen, VictorDeveloping countries are increasingly offering tax breaks to attract investors and pursue various policy objectives such as encouraging investments in research and development (R and D) and increasing exports. Such incentives, however, can be very costly to governments. Too often, developing countries - already struggling with revenue mobilization - adopt investment incentives in an ad hoc manner, without analyzing the value for money of these instruments. Cost-benefit analysis can help policy makers demonstrate the direct cost (tax revenue foregone) incurred by governments against the economic benefits being pursued. Global evidence on investment location decisions suggests that while tax incentives can help attract investment, other factors, such as the wider investment climate and market opportunities, matter most. Tax incentives should therefore be conceived as part of a country’s broader investment policy framework and governments should be realistic about the potential impact any measure may have. In this light, cost-benefit analysis can serve as a powerful tool to inform incentives policy reform and offer important inputs into a country’s investment policy strategy.Publication Institutions for Investment: Establishing a High-Performing Institutional Framework for Foreign Direct Investment(Washington, DC: World Bank, 2019-12-31) Heilbron, Armando; Whyte, RobertA 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.Publication 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, NinaThe 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.