Country Economic Memorandum
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Publication
Leveraging Global Value Chains for growth in Turkey: A Turkey Country Economic Memorandum
(Washington, DC: World Bank, 2022-03-02)Turkey saw phenomenal growth in the 2000s as economic reforms ushered in FDI, GVCs expanded, and productivity increased. The early 2000s saw Turkey exit from major economic crisis with a strengthened fiscal framework, a strengthened, inflation-targeting mandate for the Central Bank, the establishment of an independent bank regulator, and importantly, a recently agreed Customs Union agreement with the EU. From 2001 to 2017, incomes per capita in Turkey doubled in real terms and tripled in current dollar terms. Turkey transformed from a lower-middle-income country (LMIC) at the start of the 2000s to very nearly reaching high-income status by 2014. This drove a rapid fall in poverty from above 30 percent to just 9 percent1. Very few other countries matched Turkey’s growth over this period, and almost all of them were new EU member states. -
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Resilient Development - A Strategy to Diversify Cambodia’s Growth Model: Cambodia Country Economic Memorandum
(World Bank, Phnom Penh, 2021-12)The devastating impact of the Covid-19 pandemic on the Cambodian economy—where the growth slowdown was among the most pronounced in the East Asia and Pacific (EAP) region—lies in the country’s growth generating process. Recent growth has been remarkable, but insufficiently diversified in products, markets, and factor inputs. The diversification problem is rooted in low and declining productivity; low quality and weak export linkages; and high foreign direct investment (FDI) but low domestic investment. Just when past success was fueling high ambitions for future growth—to become upper middle income by 2030 and high income by 2050—the pandemic threatens to put those targets out of reach. Cambodia’s policymakers have the opportunity to build a new and stronger growth path—by enabling productivity of firms and workers, diversifying exports, and harnessing domestic investment. But an ambitious reform agenda is needed—one that focuses on improving capabilities, strengthening regulations, and investing in infrastructure. -
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Removing Regulatory Barriers to Competition
(Washington, DC, 2021-11)Competition can drive productivity growth in Kosovo, especially in the context of the post-Coronavirus disease 2019 (COVID-19) recovery. As the economy rebuilds, it is key that markets function smoothly, and that anticompetitive firm behavior or government intervention do not constrain the path to recovery. Competitive product markets can help a country recover from economic shocks more quickly. Competition in product markets can also prop-up economic recovery in a more inclusive way for the poorest households. Kosovo has made significant progress towards pro-competition regulation of product markets but there is still significant room for improvement. Although the product market regulation (PMR) indicators are limited in scope and should therefore be considered as an entry point for further analysis, this assessment allows to identify potential constraints to competition and possible policy reforms. Kosovo can increase competition by: (a) eliminating public owned enterprise (POE) - related barriers to competition to ensure a level playing field for private and public operators in markets where they compete, (b) improving the regulatory process and facilitating business registration to boost market entry, and (c) introducing policy reforms in network sectors and professional services to eliminate regulatory barriers to competition and avoid anticompetitive practices. -
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Kosovo Country Economic Memorandum, November 2021: Boosting Foreign Direct Investment
(World Bank, Washington, DC, 2021-11)Foreign direct investment (FDI) can bring many benefits to Kosovo’s economy, creating more and better jobs and spurring greater and more resilient economic growth. Many transition economies have used FDI as a pillar of their structural transformation and modernization efforts. The small number of firms in Kosovo that include FDI are more productive than other firms, and they were more resilient in the wake of the Coronavirus disease 2019 (COVID-19) economic recession. In Kosovo, FDI inflows have been concentrated in sectors that provide limited potential for productivity spillovers and benefits to the domestic economy. Kosovo needs to adopt proactive policies to strengthen its investment competitiveness and investor outreach in order to unlock more and higher-quality FDI. This note presents an ambitious reform agenda that can help improve Kosovo’s investment competitiveness and investor outreach. It presents a step-by-step reform program for unlocking the full potential of FDI for economic growth and job creation in Kosovo that the government can implement in the short to medium term. The note is structured in three sections. The first section looks at Kosovo’s FDI performance and assesses the quantity and quality of the FDI attracted so far. The second section benchmarks Kosovo’s locational FDI determinants, considering a set of macroeconomic and microeconomic indicators for its overall FDI competitiveness. The third section combines the findings from the first two sections with an in-depth assessment of Kosovo’s policy, legal, and institutional framework for investment to present a targeted reform agenda and policy action plan to help attract more and higher-quality investments to Kosovo. -
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Kosovo Country Economic Memorandum, November 2021: Raising Firm Productivity
(World Bank, Washington, DC, 2021-11)To boost economic growth and foster sustained formal job creation in Kosovo, igniting firm productivity is crucial. Based on detailed micro-data, this note examines the characteristics and recent evolution of firms in Kosovo, with particular attention to firm productivity. For the last decade, the landscape of firms in Kosovo has been dominated by microenterprises with low productivity, employment, and survival rates. Firm creation and growth,small firm density, average size, and the likelihood of survival are all low, which implies that there are severe constraints on private sector development. Kosovo’s firms are only tenuously linked to global markets and the country is lagging in the share of female-run companies. Positive and rising net job creation in 2015-18 was driven by higher formalization of jobs and the increasing size of incumbent firms, especially young small and medium enterprises (SMEs). Kosovo needs a multidimensional policy strategy to foster growth in firm productivity. Based on the study findings and the results of other notes prepared for Kosovo’s country economic memorandum (CEM), this note presents a policy strategy that targets the three main sources of firm productivity growth: (1) firm productivity (the within component); (2) market reallocation (the between component); and (3) firm dynamics (entry and exit). Section one examines the characteristics and recent dynamics of Kosovar firms. Section two analyzes the drivers and evolution of productivity, with emphasis on the links between productivity and access to credit. It also assesses the main barriers to productivity growth. Section three sheds light on how Coronavirus disease 2019 (COVID-19) has affected Kosovar firms. Section four concludes by discussing tentative policy implications of the analysis. -
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Kosovo Country Economic Memorandum, November 2021: Gearing Up for a More Productive Future
(World Bank, Washington, DC, 2021-11)Kosovo, one of the youngest countries in an aging Europe, took its first steps on the road to greater prosperity a quarter of a century ago. Kosovo’s economy has experienced significant growth in recent years. The Coronavirus disease 2019 (COVID-19) pandemic has triggered Kosovo’s first ever recession in 2020. While spending on education has more than doubled, the quality of human capital needs to improve. And barriers to women’s economic empowerment need to be lifted. Proximity to major markets in Europe and a youthful population provide an opportunity for growth. Kosovo is one of the youngest countries in an aging Europe. Trade facilitation and logistics connectivity are getting better. Proximity to a large and affluent market, low taxes and labor costs, a resilient and liquid financial sector, and strong ties with its diaspora will help support growth. -
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Somalia Country Economic Memorandum: Towards an Inclusive Jobs Agenda
(World Bank, Washington, DC, 2021-07-01)Somalia has a triple challenge of low levels of labor force participation, low productivity, and high levels of poverty. Economic growth in Somalia has been low, subject to shocks; and thus, insufficient for job creation. Shocks to the economy have contributed to forced displacement, a dominance of jobs outside of agriculture, and rapid urbanization. The Somali economy is largely driven by consumption and supported by external financial flows. In Somalia’s state-building context, enhancing political stability and developing a social contract is fundamental for growth. The objective of the Somalia Country Economic Memorandum (CEM) is to inform the economic policy dialogue and broader debate in Somalia regarding the types of reforms required to stimulate growth and job creation. The Somalia CEM applies and adapts the Jobs and Economic Transformation (JET) Framework. The JET framework has two pillars, one which considers job-creating private investments, and the second that concerns building the capabilities of workers. In the Somali context, efforts have been made to incorporate a gender and inclusion lens, given the particularly low levels of female labor force participation. The report has two special focus chapters on trade and integration and entrepreneurship, due to their importance to growth and jobs in the Somali economy. However, a detailed value chain analysis goes beyond the scope of this report. The report utilizes available quantitative data, primary research conducted for the study, and builds on earlier work. The report considers both the structure of today’s economy and the source of jobs, as well as potential future drivers of growth. -
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Overview of Digital Development in the Horn of Africa
(World Bank, Washington, DC, 2021-06-21)This paper follows the World Bank Group’s approach to Jobs and Economic Transformation (JET) which identifies economic transformation as key to creating more and better jobs. It builds on the Digital Economy for Africa (DE4A) approach to developing a digital economy to create the jobs of the future, which is aligned with the African Union’s Digital Transformation Strategy, 2020-2030. Helping countries build new digital This section is prepared in the context of Covid-19 pandemic that threatens decades of hard-won development gains and is likely to have triggered the deepest global recession since the World War II. The economic crisis is generating massive unemployment, particularly affecting the poor and vulnerable, and highlights the importance of jobs and economic transformation. The HoA countries already faced the challenge of a population growth at a rate around 3% preinfrastructure, and to develop regulations, skills and platforms that are compatible with neighboring countries should enable them to develop a larger and more efficient digital market that can facilitate economic transformation by enabling technological leapfrogging, and the creation of new jobs in old and new sectors. New forms of market connectivity can bring opportunities for new services and regional economic development in the Horn of Africa. -
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A Framework for Enhancing Intra-regional Connectivity in the Horn of Africa
(World Bank, Washington, DC, 2021-06-21)This background paper systematically maps and assesses the connectivity of cities in the Horn of Africa (HoA) and uses the results to proposes a number of policy perspectives on how to strategically boost connectivity in different parts of the region. Analytically, this is achieved through network analysis of the directness, the diversity, topology and the density of HoA cities’ transport infrastructure connections. Crucially, network analysis allows proxying HoA cities’ potential to participate in value chains at various geographical scales and identifying key areas of possible intervention. Results can guide institutional and governance measures that can be taken to influence connectivity as a whole and for specific cities and transport corridors in particular. The output can thus help determine the interventions that are needed to tackle bottlenecks in corridors, addressing infrastructure, policy and regulatory constraints. The remainder of this paper is organized as follows. Section 2 outlines the rationale for an analysis of inter-urban connectivity in general and its linkages with the broader topic of regional integration and the economic geographies of the HoA in particular. Section 3 discusses our analytical framework, while Section 4 discusses the results. The paper is concluded with a discussion of key policy perspectives in section 5. -
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Escaping the Low-Growth Trap: Guinea-Bissau Country Economic Memorandum
(World Bank, Washington, DC, 2020-11-02)Guinea-Bissau’s massive economic potential has not so far translated into better livelihoods for its population. Growth per capita has averaged less than 1 percent per year over 2000-2019. This chapter provides an in-depth analysis of the factors behind the economic stagnation. An interplay of three constraints have impeded sustained high growth. First, the low and volatile growth performance is linked to fragility and political instability, which, together with a poorly diversified economy, with raw cashew nuts accounting for 95-98 percent of export earnings, help explain the stop-go growth cycle. Second, human capital accumulation remains low. An acute shortage of a skilled workforce is a major constraint to inclusive growth. The education system is marked by alarmingly low levels of learning. Third, private investment is particularly low—the second lowest in Africa. Years of underinvestment in infrastructure, energy, and human capital are holding the country back from achieving strong, enduring and inclusive growth. The chapter concludes by highlighting how the COVID-19 crisis exacerbates these constraints and discusses areas that could support sustainable growth. The chapter is organized as follows: section 1.1 presents a brief overview of the political and social context. Section 1.2 puts recent growth into historical and comparative perspective. Section 1.3 presents analysis that helps explain the low-growth trap and identifies possible areas that Guinea-Bissau could pursue to escape this trap. Finally, Section 1.4 discusses the economic impact of COVID-19 and potential pathways to recovery.