With a slowdown in the rich economies (particularly in the housing sector in some countries), might we see large numbers of migrants returning to their home countries? It looks like Poland, at least, is making plans. According to the Polski blog, Poland's government is trying to help:Polish PM Donald Tusk was in London yesterday. He was supposed to try and convince Poles living here to come back to Poland, by asking “Do you have a return PLan?’ (PL stands for Poland, of course). All that because the Polish government has launched a special site, where Poles living in the UK can get advice regarding moving their lives back to Poland.Of course, the financial crisis might have the opposite effect in some cases. Trinidadian blogger Coffeewallah remembers the 1980s:I well remember the...
The Financial Times today reports that China does U-turn on online money-making. Making 'real' money by trading virtual currencies earned from online gaming was banned two years ago, but it looks like the Chinese government has changed its mind. China will now collect a 20 percent tax on income earned from online gaming.
As I point out in a post on The end of Doha and the World of Warcraft, gold farming and trading in virtual currencies is "largely under the radar of the World Trade Organization and, to some extent, government tax collectors." The FT cites an online contributor with a slightly more poetic take on the issue: "If they successfully implement this tax, I will jump over Mount Everest."...
The Doha trade talks failed this week...and Dani Rodrik asks so what? In his view, the probable gains from this further trade liberalization were not significant. I would add that at least in some sectors, formal trade liberalization is becoming increasingly irrelevant. The internet has created the possiblity for ever greater amounts of trade in services that are largely under the radar of the World Trade Organization and, to some extent, government tax collectors.
One example is that of outsourcing of tutors. India now supplies online tutoring help for many of America's struggling high school students. But tutoring may be just the tip of the iceberg. One estimate has it that gold farming - the practice of earning virtual currency in an online game and exchanging it for real currency -...
Communism failed to do it - can capitalism do any better? So far, the answer is not clear. I'm referring to the integration of the Romani minority into the mainstream of eastern Europe's transition countries. For those not familiar with this topic, 'Roma' is the polite term used in place of the more common 'Gypsy'. (The words themselves are laden with baggage - in English, Gypsy is tied to the pejorative verb "to gyp", while the Slovak version 'cigan' is tied to the verb 'ciganit', which means "to lie.") The approach of the authorities in most communist countries in the 1950s was to forcibly sedentarize the population, a nice term for shooting their horses and burning their wagons and most of their possessions. Many Roma were then forced into new industrial settings -...
While it tends to get short shrift, the "other" private sector - that is to say, the non-profit sector - is a significant component of economic activity in many countries. It is also probably an important component of development overall, if we are to believe theories of social capital such as those found in Robert Putnam's Making Democracy Work or Francis Fukuyama's Trust.
However, non-profits are often overlooked because most non-profit activity is not incorporated into the system of national accounts that govern reporting of economic activity. Some fellows at Johns Hopkins University have been clamoring for change. The Johns Hopkins Center for Civil Society Studies released a publication called Measuring Civil Society and Volunteering that argues that non-profit activity should be...
Transparency International has just released its annual corruption report, and this year's focus is on corruption in the water sector. Undoubtedly, the 398-page tome will draw a lot of attention to what Transparency International makes clear is a crisis:In developing countries, about 80 per cent of health problems can be linked back to inadequate water and sanitation, claiming the lives of nearly 1.8 million children every year and leading to the loss of an estimated 443 million school days for the children who suffer from water-related ailments.The report takes a relatively agnostic view on public versus private provision of water (at least the parts I managed to read - did I mention it's almost 400 pages?). Much of it is devoted to looking at how corruption in the water sector, whether...
In a dispute reminiscent of the Compartamos controversy, the Sahara India Financial Corporation has been has been ordered by the Indian Central Bank to stop taking deposits. Sahara provides a range of financial services, most prominent among them deposit accounts for the poor. If savers get behind on their deposits, Sahara penalizes them by reducing the interest they receive. According to a report in the Wall Street Journal (subscription required), more than 70 percent of Sahara ???s customers are currently being penalized.The Indian Central Bank has taken a dim view of Sahara's operations. In a filing with the Indian Supreme Court, it has aruged that "[s]mall depositors in the lower strata of society are being exploited." Subrata Roy (pictured), the founder of Sahara, had this to say in...
Nancy Lee, a visiting fellow at the Center for Global Development, calls for a regional investment agreement for Latin America in an online Q&A posted today. She argues that a regional investment agreement would work much like free trade agreements, with member countries setting common standards to reduce barriers to investment. How could you measure whether members are complying with these standards? Lee argues that comparable data on things like the costs of starting a business and the strength of creditor rights would do the trick. ......
So far we have learned a lot about migration. But even though women account for nearly a half of all migrants, we still know little about the impact that gender has on labor markets participation or remittances, which reach nearly $200 billion a year.
A new book - hoping to fill the gap - focuses on the differences behind men and women's decision to migrate, the respective amounts of money they send back, and points to some understudies aspects of migration such as family cohesion and trafficking of women....
Though most agree that taxes are important and necessary, the question "how to best design them" remains.
RRU has added a SME tax toolkit with advice for policymakers on how to bring and keep small business in the formal economy....
Though today's 15-to-24-year-olds are overall the best educated generation of youth in history, young people often have to struggle the most in the job market, finds the World Youth Report 2007.
This age group which makes up 25 per cent of the global working-age population also accounts for nearly 44 percent of the unemployed.
More on the subject: four new working papers on youth employment in the Middle East....
Global recorded remittances to developing countries reached $204 billion in 2006. This amount, which has been growing at almost 30 percent a year, is twice the size of total development aid.
Remittances hold a big promise for development but a lack of transparency and a high volume of unrecorded money flows, pose security risks and keep the costs high.
The Financial Market Integrity unit of the bank created the Bilateral Remittance Corridor Analysis (BRCA) to better monitor and analyze the size, nature and incentives behind the transfers. For more information see BRCA's draft research guidelines - a user-friendly starter kit to understanding remittance flows....
Japanese-style comics meet World Bank propaganda with good reviews from BusinessWeek. It's "World Manga."
Rei, the teenaged orphan who wants to be a martial artist, and his companion, the animal spirit guide, learn through adventure about poverty, HIV/AIDS, global warming, girls' education and, of course, corruption....
"If you want something done right, do it yourself" says an old adage. The team responsible for Enterprise Surveys has taken this concept deep to its heart when it created the new custom query tool.
Do Your Own Analysis lets you slice and dice firm-level, microeconomic data across 172 indicators from over 100 developing and developed countries. Best of all, each query produces a custom graph that's ready for cut and paste.
Clearly, doing homework will never be the same. Do Your Own Analysis, where were you two years ago?!...
The recent investment by IFC, the Netherlands Development Finance Company and Deutsche Bank in Aasishkaar Goodwell, a private equity company supporting microfinance organizations in India, will create of almost 60 greenfield microfinance institutions to serve a potential client base in India of nearly 75 million households.
But is microfinance the right tool for development? Aneel Karnani from the University of Michigan says no: There is no developed country that has developed on the basis of microenterprises. All developed countries have larger enterprises (which, as I have emphasised, includes small and medium sized enterprises). Scale economies play a critical role in increasing productivity, which is the foundation of economic development. Rather than lending $200 to 500 women so...
The World Business Council for Sustainable Development published a 12-page primer on the contributions of SMEs to the larger work of governments, businesses and local communities.
The brief describes the benefits that large corporations can derive, such as extensive local knowledge of resources, supply patterns, and purchasing trends, through the inclusion of SMEs in their value chains.
The graph below shows the positive relationship between the ease of doing business, the number of SMEs per 1000 people, and an overall level of income....
Between November 13 and 15, 2007 in Mumbai, India, CGAP and Munich Re will sponsor the third international Microinsurance Conference.
Traditionally, large, commercial insurers have been deterred by high costs and small premiums leaving the poor to rely on informal or mutual schemes for risk management. Responding to the challenge, the conference will focus on new, cost-effective products for low-income groups.
See also last year's report focusing on social vulnerability....
Our second IFC report "Business Environment in Tajikistan as seen by Small and Medium Enterprises, 2006" spurred a new law designed to simplify licensing and registration requirements and promote the SME lending market.
So, is everything going well for Tajik SMEs? Unfortunately not. The positive changes highlighted above need to be strengthened and institutionalized. The inspection and licensing law need to be carefully implemented. Despite the reform, many laws exist only on paper. An example: most individual entrepreneurs need to register their business at start-up. Legally this is all they are required to do. Yet in practice, the registration bodies issue certificates with a limited one-year validity, forcing entrepreneurs to reregister every year and pay.
On the SME...
Clare Lockhart, the founder of the Institute of State Effectiveness, calls, in an FT article for remodeling of government financial management system to resemble the private sector model: The World Bank and its partners should turn their focus from corruption within World Bank-funded projects to financial systems as a whole.
The mechanism would be simple. States would be required to publish online an annual report setting out their income and expenditure, provide a balance sheet of assets and liabilities and outline which public assets had been sold to whom, at what price and through what process.
Unless state resources are firmly evaluated and monitored we should not be surprised if […] developing countries are subject to Enron-type collapse. Ms. Lockhart and Ashraf Ghani, the...
Clare Lockhart, the founder of the Institute of State Effectiveness, calls, in an FT article for remodeling of government financial management system to resemble the private sector model: The World Bank and its partners should turn their focus from corruption within World Bank-funded projects to financial systems as a whole.
The mechanism would be simple. States would be required to publish online an annual report setting out their income and expenditure, provide a balance sheet of assets and liabilities and outline which public assets had been sold to whom, at what price and through what process.
Unless state resources are firmly evaluated and monitored we should not be surprised if […] developing countries are subject to Enron-type collapse. Ms. Lockhart and Ashraf Ghani, the...
Our second IFC report "Business Environment in Tajikistan as seen by Small and Medium Enterprises, 2006" spurred a new law designed to simplify licensing and registration requirements and promote the SME lending market.
So, is everything going well for Tajik SMEs? Unfortunately not. The positive changes highlighted above need to be strengthened and institutionalized. The inspection and licensing law need to be carefully implemented. Despite the reform, many laws exist only on paper. An example: most individual entrepreneurs need to register their business at start-up. Legally this is all they are required to do. Yet in practice, the registration bodies issue certificates with a limited one-year validity, forcing entrepreneurs to reregister every year and pay bribes.
On the SME...
Between November 13 and 15, 2007 in Mumbai, India, CGAP and Munich Re will sponsor the third international Microinsurance Conference.
Traditionally, large, commercial insurers have been deterred by high costs and small premiums leaving the poor to rely on informal or mutual schemes for risk management. Responding to the challenge, the conference will focus on new, cost-effective products for low-income groups.
See also last year's report focusing on social vulnerability....
In 2004, the cost of corruption was estimated at $1 trillion a year. John Bray, the author of a corruption survey included in the 2007 Transparency International report, authored a 'handbook' for private, international companies, in which he points out why and how to avoid the pitfalls of bribery.
The graph below shows a percentage of companies (350 surveyed) that believe they had lost business due to a competitor’s bribe over last 5 years:
With an even greater focus comes a recent 480-page-long World Bank publication which explores corruption vulnerability on a sector level through value chain analysis. The book hopes to be a tool for diagnosing this harmful phenomenon....
Usually when we think about corruption we think that one side (i.e., the government official) is demanding, while the other (i.e., the citizen, the entrepreneur, the company) is forced to obey fearing the consequences.
In reality, the situation is not always so straightforward. There are cases in which corruption, the little kind ("petty corruption" as it is usually called), becomes part of the usual way of doing business and is the "preferred solution" for dealing with public officials. Take Tajikistan, my adoptive country of 12 months. Like many other countries, we see the following combination of factors: extremely low salary level for government officials, complex economic regulations that make compliance practically impossible, and, finally, low legal awareness among the general...
In a Wall Street Journal op-ed (subscription required), Paul Cleary - an Australian journalist and a former advisor to the East Timor government - links a decline in GDP per capita to instability: In focusing on the immediate trigger for renewed conflict, however, analysts have largely overlooked East Timor's sharp and sustained decline in per capita GDP -- a sufficient condition for sending any post-conflict country back into conflict.
In the two years that I worked and traveled in East Timor there was a palpable dearth of government activity throughout the country. Labor-intensive capital works were a rarity. Youths would stare blankly when asked when they last had a job; many had never worked. Some of the small towns had no shops because the people living there had no money. Barter...
The new UN–World Bank report links the low rates of economic development to record high crime levels in the region.
Caribbean nations have world's highest murder rates – 30 per 100,000 people annually. Violence against women is commonplace (48 percent reporting their "sexual initiation" as forced) and the rate of kidnappings is on the rise (Trinidad and Tobago almost doubling its 1999 numbers).
The price for lawlessness is soaring. Skilled workers are leaving the region – an alarming 89 percent of college graduates emigrate from Guyana each year. Jamaica spends almost 4 percent of GDP on security, and 4 out of 10 managers said that crime levels kept them from investing in the islands.
If Haiti and Jamaica brought their homicide rate to that of Costa Rica, both countries would...
Using survey data from Sri Lanka, recent research finds substantial discrepancies between reported profits and the difference between reported revenues and expenses, with the former being larger. Mixing business with household consumption as well as incurring revenues and expenses in different time periods explain large part of the difference.
So, better ask for the sausage, but not the ingredients....
I've spent the last week in northern Sudan, talking to informal manufacturers and craftsman about the problems they face in dealing with local taxes and license fees. Many say they would be happy to pay up if only they received services in return. Mohammed, who runs a metal-working shop in Khartoum, is frustrated by the unwillingness of local government to take his concerns seriously: Why should I pay these taxes when I get nothing in return? They ask us to pay an anti-malaria fee, but we don't see any clinics; they ask us to pay a sanitation fee but we don't have clean water; and look at the rubbish in the streets. We tried to negotiate with the local authorities but it's hard. The tax collectors have targets and if they don't meet them, they lose their jobs. Once we persuaded the court...
I'm just back from our enterprise formalization conference in Ghana. We had a broad mix of policy-makers and private sector representatives from 15 African countries and a very stimulating discussion. I will be putting up some more considered reflections on the conference website later this week, once I've recovered from the jetlag. Meanwhile let me try to sum up what was said and the lessons we (think we) learned. In the process I'd like to respond to some of the points Edoardo and Chanyaka have raised in their comments on my last post.We all agreed that the first task facing policy-makers is to identify and reach those individuals and enterprises for whom the individual and social payoffs to formalization are greatest. As Eduardo points out, many people are outside the system through no...
Our debate on enterprise formalization continues.
Jan Loprick has dispatched himself to Liberia where he has been pondering whether this agenda makes sense when almost the entire economy is informal and the most pressing need is to preserve livelihoods and find employment for recently demobilized soliders. His answer is a tentative yes, provided policy-makers concentrate on linking formalization to tangible benefits (e.g. access to markets, practical security of land tenure) and ease up on enforcement. From Jan:Sure, capacities are very limited in Liberia but sometimes small carrots might be sufficient. For small scale miners a reliable claim to their mining parcel might be reason enough to get a mining license and comply with tax requirements.As usual, regulatory simplification is a...