PSD-Blog - World Bank Group

Perhaps the title is a rhetorical question, but I felt obliged to ask it after seeing the latest parody of a World Bank initiative. If you've been ignoring CNN, you may have missed the news that the World Bank Institute recently launched a massively multiplayer game called Evoke designed to get people around the world to work collaboratively on pressing problems like food security, human rights, etc. Evoke builds a storyline based around a comic book (eh hem, sorry, graphic novel) to lay out a quest each week. The initiative is still very new, so it is hard to judge its value, but in general I see great potential in "serious games" like this. It took very little time for a parody of Evoke to crop up, called (appropriately enough) Invoke. At first, I took it in good humor. Parody and snark have their uses, all the way from Swift's...

The first day of this year's Financial and Private Sector Development Forum is about to wind down. I had the opportunity to attend several fascinating discussions, including: A workshop on catastrophic risk insurance in the Caribbean A discussion on building venture capital opportunities in developing countries A look at Africa's industrial future An inspirational talk by Ingrid Munro on how she built Kenya's largest microfinance institution with a team of beggars For those unable to attend this year's forum, we have an active Twitter feed, where every attendee can share his or her thoughts on what they've seen. Check it out. Tomorrow Niall Ferguson will discuss whether developing countries have learned from the history of money, or if they're simply doomed to repeat it. Did any of our readers attend today's events? Feel free to use the comments section to discuss your reactions to the Forum thus far.

Does Haiti (or Chile) need a Marshall Plan to help recover from the ruins of natural disasters? How has the War on Poverty progressed in the United States? What about the Gates Foundation's War on Malaria? Foreign Policy editor Moises Naim has a simple suggestion to each of these questions: It's time for a new analogy. Social policy doesn't need new wars and Marshall Plans: In fact, no imitation of the Marshall Plan has ever worked, and no war on a big social problem has ever ended in defeat for the enemy (save, perhaps, cigarettes). But the allure of these spurious comparisons remains as strong as ever. Without any apparent effect, Marshall Plans have been proposed to help Africa, the Middle East, New Orleans, Iraq, and even Wallonia, Belgium's least prosperous region. Bill Gates wants a Marshall Plan to broaden access to technology, French President Nicolas Sarkozy urges one for...

The World Bank's new chief economist for Financial and Private Sector Development, Asli Demirgüç-Kunt, has entered the blogosphere with the new All About Finance blog. In her first post, Asli considers whether the financial crisis ought to make us consider turning bureaucrats into bankers. She responds with a resounding "no"! Research is seldom conclusive, but in the area of state ownership of banking the evidence is as overwhelming as it gets. When it comes to lending, it appears that the state banks are the best at lending to cronies. Government officials face conflicts of interest that go against efficient allocation of resources – such as securing their political bases and rewarding supporters. Overall, greater state ownership of banking is associated with less financial sector development, lower growth, lower productivity and even less stability – and it is more damaging at lower per capita income levels where there are typically fewer...

Mark Thoma takes a look at who pays the cost of the recession: The recession is taking away opportunity for the young to gain employment experience, and many who are employed are working below their abilities in jobs they are likely to get stuck in for many years, if not forever. The recession is wiping out the accumulated assets of the unemployed as they try to bridge the gap until jobs return, and since many of these are older workers, this will have a large detrimental effect that lasts throughout their retirement years. Recessions cause skills to depreciate, there are psychological costs, there are costs to family members, the loss of a job generally means loss of health care, the costs to working class households go on and on. It is worth repeating that many of the externalities of the financial crisis are likely to become perpetual, as middle-aged workers...

Bloomberg has announced that the worst is yet to come for the euro, thanks to ongoing Greek woes. The last time I discussed Greece was in this post last November: The unfolding events in Dubai bring into question the stability of the global recovery, which has largely been fueled by extraordinary government support mechanisms. The combination of the Dubai government abandoning the liabilities of its own company, along with Abu Dhabi's reluctance to get involved, shows that government support cannot always be assured, even when capital for a bailout can be easily secured. If Abu Dhabi, home of the world's largest sovereign wealth fund (and a very small population), is unwilling to bail out its own compatriot, can it be guaranteed that Germany will bail our Greece (or Ireland, or Spain)? Or Sweden will bail out Latvia? Or Austria will protect its banks' exposure to Eastern Europe? Or that Washington...

The New York Times has an interesting story on the controversy surrounding improvements to South Africa's bus lanes. The government has been building special bus-only lanes and modernizing its fleet with new Brazilian-made buses, making it cheaper and faster for workers to travel from townships to wealthier suburbs: The new Bus Rapid Transit systems planned for South Africa’s major cities in recent years have promised to ease those hardships by providing fast, affordable, dignified travel on bus lanes cleared of other vehicles. Prodded by a national commitment to improve public transportation for soccer’s 2010 World Cup, Johannesburg is carrying out the nation’s most ambitious program. The city predicted that buses would be rolling from Soweto, where a quarter of the city’s four million residents live, to Sandton, the region’s commercial and financial hub, by June. The project has run into objections from shared-taxi drivers (who previously dominated the market) and...

Picking up from yesterday's microfinance discussion, let's have a look at what's happening in Kenya. Over at CGAP, Kate McKee discusses the relationship between microfinance and consumer protection. Through interviews with a Kenyan driver who runs his own taxi company, McKee highlights three potential consumer protection problems: Lack of transparency on the all-in cost of credit. Microfinance interest rates are often quoted by the month, rather than annually, and frequently omit the miscellaneous fees that go along with taking out such loans. As McKee notes, "studies by Microfinance Transparency suggest that the actual cost of credit is typically MUCH higher than customers understand, and soon-to-be-published data for Kenya is highly likely to reveal the same reality." As mentioned earlier in David Roodman's discussion of Bangladesh, the problem over over-indebtedness and taking on multiple microfinance loans may trap borrowers in a debt spiral. The third problem has more to do with...

Editor's Note: Heinz P. Rudolph is a senior financial sector specialist in the Financial and Private Sector Development Vice Presidency of the World Bank Group. This is the 12th in a series of policy briefs on the crisis—assessing the policy responses, shedding light on financial reforms currently under debate, and providing insights for emerging-market policy makers. The need to kick-start lending to the real sector in response to the global financial crisis is leading many countries to expand the role of state-owned financial institutions. The effectiveness of the support by these institutions depends in large part on the nature of the shock, on their ability to leverage private commercial banks to scale up their impact, and on the existence of a sound institutional framework. While it is too early to evaluate their effectiveness, past experience with the use of such institutions is sobering. Whether countries will heed the lessons of...

David Roodman of the Center for Global Development has written an excellent blog on the woes at Grameen Bank, asking whether Grameen has been fueling a microfinance bubble. Many households in Bangladesh are overindulging in microfinance loans: Multiple borrowing is widespread in Bangladesh now, and it has raised concerns that some Bangladeshis are juggling microcredit loans the way some Americans juggle credit card debt, in a merry-go-round that must one day stop. The worry, in other words, is that there is a microcredit bubble. In 2007, Shafiqual Haque Choudhury, founder and head of ASA, which is known as the most commercially savvy of the big three, worried aloud about a “train crash.” And that was before the global financial crisis, which has probably been transmitted into poor Bangladeshi households via lower exports of clothing made in Bangladeshi factories and fewer construction jobs in the Middle East for Bangladeshi workers. Indeed,...

Editor's Note: Leonardo Lemes is a Private Sector Development Consultant in the World Bank's Global Insolvency Technical Assistance Program. On December 14, 2009 the Government of Dubai, under the patronage of Sheikh Mohammed Bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE, issued Decree 57 ("The Decree") exclusively to supervise existing and future formal reorganization and restructuring of the Dubai World Group of companies (DWG). DWG manages and supervises a portfolio of businesses and projects for the Dubai government across a wide range of industry segments, and projects to promote the emirate's economic growth. The decree is a customized version (with specific alterations) of the existing Insolvency Law and the Insolvency Regulations of the Dubai International Financial Center (DIFC), which is regarded as cost-effective, efficient, timely, and balances the interests of debtors and creditors. It features a comprehensive financial restructuring and reorganization framework to manage the disputes...

Identifying a suitable location for investment is among one of the first decisions to be made once a company has committed to entering a local market for an FDI project. Many assume that foreign companies would automatically seek to acquire land in the most secure and legally available option – typically either purchasing freehold from a private seller or in a long term lease from the government. Doing so would allow the investing company to earn income over time on the asset (such as foreign investors have done investing in bungalows in Singapore), maintain complete control over land use and possibly use the property for collateral. However, this assumption is at times contradicted by the facts. Many foreign companies investing abroad may actually prefer to acquire land in the form of lease contracts. A recent example of this is the announcement by George Soros-backed Adecoagro to acquire land for its...

The World Bank's Doing Business team has launched its second annual Subnational Colombia report. Colombia was among this year's top 10 reformers in the general Doing Business survey, with every city pulling its weight. Each of the 13 regions previously benchmarked showed improvements in at least one of the areas measured. Over 75 percent of cities now offer one-stop shops to start businesses. Doing business is easiest in Manizales, Ibagué and Pereira, and more difficult in Cali and Cartagena. One of my favorite aspects of the subnational reports is that they showcase how different regions within the same country can learn from each other. A hypothetical Colombian city that adopted all the best practices identified in this report would rank 17th of 183 countries globally -- 20 places ahead of Colombia’s position in the global Doing Business 2010 report.

The current blizzard conditions in Washington D.C. are testing World Bank staff capabilities to work remotely. Advances in technology no longer mean we have to shut up shop completely - though some no doubt lament the loss of the care free snow day of the past. This new option through technology reminded me of a recent briefing on Harnessing Development 2.0: Creating Opportunities with the Poor, the latest in the World Bank Institute's Business and Development Discussion Papers. The authors make a strong case that technology is helping transform access to markets, money, and skills and driving more inclusive business models through overlapping processes of business development, market development, and network development. Zahid Torres-Rahman, one of the authors, has been instrumental in creating Business Fights Poverty - one of the more successful examples of a supporting network that links professionals from a variety of perspectives actively working in private sector...

McDonald's is celebrating its 20th anniversary in Russia this week. One of the most interesting aspects of McDonald's' Russian adventure is the evolution of its supply chain, which has developed remarkably in the past 20 years. Today, McDonald's sources all of its ingredients from outside purveyors, an 180 degree shift from when the company opened its first outlet in 1990: The company celebrated a different milestone earlier this year by outsourcing the last product — hamburger buns — it had made at a proprietary factory outside Moscow called McComplex. It was built before the chain opened its first restaurant. Nearly everywhere else, McDonald’s buys ingredients, rather than making its own. But in the Soviet Union, there simply were no private businesses to supply the 300 or so distinct ingredients needed by a McDonald’s outlet. Everything — from frozen French fries to pie filling — had to be made from scratch...

Editor's Note: This post was written by Cristina Gonzalez, a Communications Consultant within the Global Facility for Disaster Reduction and Recovery (GFDRR) who is presently supporting the World Bank Haiti Situation Room. The success of World Bank’s engagement with Volunteer Technical Communities (VTCs) is nothing short of remarkable. In a very short period of time VTCs achieved extraordinary results in building an information base about Haiti and useful applications that were applied in the response effort. In the aftermath of the massive Haitian Earthquake, this information and these tools immediately began improving the lives of Haitian population. A detailed map of Port au Prince and the surrounding areas was developed almost instantly by OpenStreetMap. This tool has become the de-facto standard used by organizations involved in Haitian disaster recovery effort, including US military. In fact, it is the most precise map ever developed for Haiti. Other VTCs, such as Crisis...

Last March, Ryan questioned the veracity of an article in the British medical journal the Lancet, which claimed that privatization in post-communist countries was responsible for massive numbers of deaths. He included rebuttals from both The Economist (subscription required) and John Earle: Earle points out that a very basic link in the chain of reasoning of the Lancet authors is missing - namely, mass privatization did not lead to substantial job loss. In fact, the effects on employment were typically neutral or positive Still skeptical? A new paper by Scott Gehlbach and John Earle from the Upjohn Institute of Employment Research takes the axe to the Lancet's data: The new analysis examines three simple checks that were made on the assumptions of the Lancet article: recomputing the measure of mass privatization, assuming a short lag for economic policies to affect mortality, and controlling for country-specific mortality trends. Any one of...

PSD alum Tim Harford links to an article by David Roodman at the Center for Global Development, arguing against the cancellation of Haiti's debt: The practical question for citizens, officials, politicians, campaigners, and other players is whether to push for that. On a few days’ reflection, I say no. I would go so far as to describe such pressure as harmful. Why? For starters, the benefits of debt relief over the next few years, however done, will be tiny…That’s why cancellation does little good in the short run. It is not a coherent response to crisis. Meanwhile, there are other ways to help Haiti much more, in responding to the crisis and in rebuilding. Looking at the recent history of humanitarian aid, the people who compile the Humanitarian Response Index judge that many official donors could do a much better job. Isn’t this the time for activists to harvest the...

What is the meaning of the word "friendly"? Greece: It's a bailout! Unemployment today vs The Great Depression. Leonardo da Vinci's CV. Is Botswana in trouble? Holden Caulfield's State of the Union Address. (See previous post for his Davos speech) Our CGAP blog has an excellent account of how cash transfers from the United States literally make it people in Haiti. Nouriel Roubini and friends discuss the "new normal for growth" at Davos. Readers can learn more about the "new normal" for job creation at this year's World Bank Finance and Private Sector Development Forum in March. The keynote speaker will be Niall Ferguson, who will discuss, "Can developing countries learn from the history of money, or are they doomed to repeat it?" The forum is open to the public. Plus, after the jump, some nerdy economics rap that's so bad, it's good:

Your humble blogger was unable to travel to Davos this year, but has nevertheless enjoyed following the action online, primarily through Twitter. For a World Bank Group perspective of what's going on, IFC Vice President Rachel Kyte's Twitter feed is an excellent source of information. Did you know that Bon Jovi's "Livin' on a Prayer" rocked the house at last night's McKinsey NightCap party? The Epicurean Dealmaker has captured the ulitmate Freudian slip from Time magazine's Michael Elliott. Bill Gates has taken off the kid gloves with Silvio Berlusconi. "Rich people spend a lot more money on their own problems, like baldness, than they do to fight malaria." Holden Caulfield's take on everything Davos. This year's wine tasting parties have been canceled. What to do instead? See McKinsey party above. Finally, Paul Kedrosky does Davos so you don't have to: (Photo Credit: Dealbreaker)