Private Sector Development, Privatization, and Industrial Policy

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  • Publication
    The Cost of Doing Business in Africa : Evidence from the World Bank’s Investment Climate Data
    (Washington, DC, 2005-11) World Bank
    This paper looks at firm-level evidence on the African business environment from surveys undertaken for Investment Climate Assessments by the World Bank in 2000-2004. These surveys confirm a pattern of generally low "factory-floor" productivity, and show that this is partly due to business environment-related losses. The surveys also show the importance of high indirect costs in further depressing the "net" productivity of African firms relative to those in other regions. Reforms are moving forward but more slowly than is needed to accelerate growth; this raises the possibility that countries settle into a low-level political equilibrium sustained partly by structural and ethnic cleavages.
  • Publication
    Infrastructure in Latin America : Recent Developments and Key Challenges, Volume 1
    (Washington, DC, 2005-08) Morrison, Mary; Fay, Marianne
    In the last decade, most countries in Latin America and the Caribbean (LAC) have not spent enough on infrastructure. Total investment has fallen as a percentage of GDP, as public infrastructure expenditure has borne the brunt of fiscal adjustment, and private investment has failed to take up the slack. Most infrastructure services have therefore lagged behind East Asian comparators, middle income countries in general and China, in terms of both coverage and quality, despite the generally positive impacts of private sector involvement. This lackluster performance has slowed the LAC region's economic growth and progress in poverty reduction. Countries of the region therefore need to focus on upgrading their infrastructure, as this can yield great dividends in terms of growth, competitiveness and poverty reduction, as well as improving the quality of life of their citizens. Catching up requires significant new investment. But first, measures need to be taken to ensure that infrastructure spending produces higher returns, both economic and social. Both these tasks involve multiple challenges. The first section of the main report reviews progress made in infrastructure coverage and quality and discusses the impacts this has had on growth, competitiveness and the fight against poverty. The second section argues that the main issue has been that there has not been enough improvement in the management of resources, which have been insufficient anyway, and also reviews the region's experiences with private participation in infrastructure. The third section builds on the lessons of the last decade to tackle the key challenges: improving social and economic returns from infrastructure, managing private participation in infrastructure better and raising new finance for infrastructure.
  • Publication
    China : Integration of National Product and Factor Markets, Economic Benefits and Policy Recommendations
    (Washington, DC, 2005-06) World Bank
    Lack of market integration has been a long-standing concern in China. The existing empirical evidence on the degree and trend in local protectionism and market fragmentation, has painted a mixed picture - some concluding to increasing fragmentation, others pointing at increasing integration. This report uses a comprehensive set of survey data, and a provincial data set to examine the extent and trends in market fragmentation. It finds mixed results across the three key markets in product, labor and capital: Since the early 1990s, the product market is increasingly integrating, with converging prices across the country, and increasing regional specialization. The survey data suggests strongly that regional protectionism declined significantly over the past 10 years. The labor market, while getting more integrated over the reform period, still shows significant fragmentation across regions and across sectors. The remains of the hukou system, the limited access migrants have to social services, and the highly uneven quality of public services reinforce labor market segmentations. The capital markets still show large misallocations in capital across industries, and across China's regions. More significantly, the empirical evidence indicates that the degree of capital market fragmentation has actually increased in the 1990s compared to the 1980s. As China is moving towards a Xiaokang Society, national market integration takes on increasing prominence. Indeed, the gains for China of better integration of goods and factor markets can be huge - much larger than the gains expected from the World Trade Organization (WTO) accession for which the country worked so hard. The report conducts policy simulations to estimate these gains. The report also estimates the economic gains from greater financial market integration. It conducts a simulation by changing the long standing urban bias policy through the movement of investment from cities to rural areas, while keeping the total amount investment constant. As a continental economy, it is time China starts its own determined effort to more rapidly integrate its markets, to maximize efficiency and growth, and ensure that the welfare gains get distributed more evenly across the nation.
  • Publication
    Kenya : Growth and Competitiveness
    (Washington, DC, 2005-01) World Bank
    The conclusions of the recently-conducted Kenya Investment Climate Assessment (ICA), based on a survey of 368 firms, have a bearing on the country's growth agenda. The results have a bearing on the key issue of labor productivity and its implications on firm performance, revealing that capital-intensity in Kenya was relatively high, compared to the rest of Sub-Saharan Africa (SSA) and also to firms in China and India, but also relatively less productive. Labor productivity in Kenya had not improved materially over the past decade or so, so that unit labor costs compared very unfavorably with those prevailing in Asian countries like India, China, Indonesia or Thailand. Major constraints to doing business cited by firms in the survey related to infrastructure, tax administration and corruption. On infrastructure, power supply was seen as the most problematic, on account of the high number of outages, compounded by high losses in transmission and distribution. 64 percent of firms reported damage to equipment on account of power outages or fluctuations valued at nearly $15,000 per firm per year. To cope with these outages 70 percent of firms had acquired generators, further adding to the cost of doing business. Road and rail services were reported by most firms as being of very poor quality, and nearly a quarter of firms reported having to spend their own resources to improve the quality of roads in surrounding areas. On corruption, three quarters of firms surveyed reported this as a problem, though only about half reported having to spend resources in terms of unofficial payments.