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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Coding Bootcamps for Female Digital Employment: Evidence from a Randomized Control Trial in Argentina and Colombia

2021, Aramburu, Julian, Goicoechea, Ana

The increase in female labor force participation is among the most salient economic and social transformations in the world over the last fifty years, and Latin America is no exception. In this regard, the gender gap in educational attainment has not only narrowed, but it has reversed itself in most countries of the region. Despite this, two important gaps remain. First, wages of female workers are, on average, thirty percent lower than those of males. Second, a high degree of occupational and educational segregation remains, with men and women being concentrated in different fields of occupations and study. This study pilots a comprehensive female-targeted computer programming training (bootcamp) in Buenos Aires, Argentina and Bogotá, Colombia. Bootcamps have become a policy instrument to tackle the following two objectives. First, they provide training on coding skills at a time when the rapid spread of new digital technologies is increasing demand for such skills. Second, when training on coding skills is specifically targeted toward women, it reduces the gender gap in terms of access to effective training on coding skills.

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Attracting Foreign Direct Investment into Tunisia through Outreach Campaigns

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.

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Less Burden, More Transparency, and Higher Quality: Electronic System for Business Safety Inspections in Peru

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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Strengthening Service Delivery of Investment Promotion Agencies: The Comprehensive Investor Services Framework

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.

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Re-thinking the Approach to Informal Businesses: Typologies, Evidence and Future Exploration

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.

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Policy Options to Mitigate Political Risk and Attract FDI

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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Investment Linkages and Incentives: Promoting Technology Transfer and Productivity Spillovers from Foreign Direct Investment

2020-05-01, Sabha, Yassin, Liu, Yan, Douw, Wim

This note seeks to provide an overview of investment incentive policy as a tool for Governments seeking to promote technology transfer and productivity spillovers by multinational enterprises (MNEs) in the host economy to local firms and suppliers. It summarizes international experiences to demonstrate what has worked and what has not worked, as well as the advantages and disadvantages of different investment incentive schemes. Evidence suggests that backward linkages between MNEs and local suppliers are the most important channels for technology and productivity spillovers to local firms (Jordaan et al, 2020). Furthermore, backward linkages offer an important avenue for ambitious local firms to integrate into Global Value Chains (GVCs). However, several market failures and challenges often prevent backward linkages from materializing. Policy makers can use investment incentives and other policy tools to help address these challenges. This note highlights examples of investment incentive schemes used by Governments, as well as their pros and cons.

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Barriers to Competition in Product Market Regulation: New Insights on Emerging Market and Developing Economies

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.

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Promoting E-Commerce in Georgia: Exploring Constraints to Online Participation using Baseline Data from an Experimental Study

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.

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Foreign Direct Investment, Backward Linkages, and Productivity Spillovers: What Governments Can Do to Strengthen Linkages and Their Impact

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.