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Development Digest: Identifying New Growth Pathways

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Issue 2, April 2017

The focus of this Digest is to share Malaysia’s people-centered developmental expertise and to present new policy research on local, regional, and global issues.

List of articles in this issue:

  1. Foreword
    The World Bank Group Global Knowledge and Research Hub in Malaysia welcomes you to the second issue of the Development Digest, a publication that features frontier research on selected economic and social development topics by experts over the previous six months.
    Ulrich Zachau
  2. The "New Normal" for Malaysia 
    The span of the lingering slump in the global economy is still unknown. Whether this is a passing sluggishness in an otherwise healthy path, or a correction to the rosy course of previous years, remains to be seen. Whatever the case may be, it is clear that the listless trade and investment flows seen across the world masks something else – a “new normal” in the global economy.
    Faris H. Hadad-Zervos
  3. The Quest for Productivity Growth
    In pursuit of its high-income goal, Malaysia needs to increase its productivity growth and continue investing in physical and human capital, by facilitating the growth of infrastructure, closing the skills gaps, encouraging both technical and nontechnical innovation, and improving the allocative efficiency of productivity factors across the economy.
    Rafael Munoz Moreno
  4. The PEMANDU Experience
    Under the right circumstances, Delivery Unites (DUs) can help to strengthen the link between a given policy and citizen outcomes. Malaysia’s Performance Management and Delivery Unit (PEMANDU) was established in 2009. PEMANDU became the largest and one of the most prominent DUs in the world, with many countries looking to learn from this experience.
    Jana Kunicová
  5. Insight: Malaysian Exporters
    Malaysia has been one of the biggest beneficiaries of global economic integration during the past decades, ranking 14th in 2015 in merchandise trade share of GDP among 165 economies. But how do Malaysia’s exporting firms perform in areas key to the long-term competitiveness of the country, such as productivity or innovation? What obstacles do they face? This note aims to provide some insights into these questions using recent Enterprise Surveys of the World Bank.
    Mohammad Amin, Jean Arlet and Hulya Ulku
  6. Financing for Lao SMEs
    Developing environments in which SMEs can grow and excel is pivotal in achieving shared prosperity. Governments need to strike the right balance between effective and restrictive regulation of business activities. A live World Bank project in Lao PDR looks into bridging access to finance for SMEs. In February 2016, a delegation led by Lao PDR Deputy Minister of Planning and Investment Dr. Khamlien Pholsena visited Malaysia to learn about the country’s best practices in grooming SMEs.
    Djauhari Sitorus
  7. Regulation in Agriculture
    The agricultural sector has been rediscovered as a sector with great potential of contributing to countries’ economic growth. Through a new examination of both the quality and the efficiency of business regulations, findings reveal agricultural productivity is on average higher where transaction costs are lower and countries adhere to a higher number of regulatory good practices.
    Raian Divanbeigi and Federica Saliola
  8. Patterns of World Agribusiness Trade
    Growth of the agribusiness sector plays a major role in overall growth and poverty reduction. Evidence shows that growth in sectors intensive in unskilled labor, such as agriculture and manufacturing, particularly contributes to reducing poverty, and can be fostered through a dynamic agribusiness sector that efficiently links farmers and consumers. Measuring and analyzing global agribusiness trade flows sheds more light on the composition and development of agribusiness.
    Fabian Mendez-Ramos and Nina Paustian
  9. Innovative Financial Inclusion
    Innovation in financial services has the potential to enhance financial inclusion in terms of access, quality, and usage in a cost-effective manner. Two big themes resonated at the 2016 Global Symposium on Innovative Financial Inclusion jointly organized by Bank Negara Malaysia and the World Bank Group Global Knowledge Research Hub inMalaysia – FinTech and Islamic Finance.
    José De Luna-Martínez, Wei Zhang and Sergio Campillo-Diaz
  10. Improving Remittance for Migrants
    “Project Greenback 2.0 – Johor Bahru”, launched in November 2015, is the product of a partnership between the World Bank and Bank Negara Malaysia. The project aims to increase efficiency in the market for international remittances by promoting changes inspired by the real needs of the ultimate beneficiaries of international money transfers: the migrants and their families at home.
    Isaku Endo and Dieter J De Smet
  11. Should we Fear a Forex Drop?
    Moderate and gradual changes of the real exchange rate are beneficial for the economy to help it attain domestic and external equilibrium, and should not be feared. However, large and sharp devaluations can lead to insolvency and even systemic crisis. They should be prevented by macroprudential policies and by avoiding unsustainable fixed exchange-rate regimes. Central bank intervention to avoid a secular depreciation is useless: it only leads to massive losses of foreign reserves.
    Norman Loayza and Fabian Mendez-Ramos
  12. Informality, Development & Growth
    The informal sector forms 35 percent of gross domestic product (GDP) and employs 70 percent of the labor force in developing economies. There are trade-offs between formality and informality in terms of labor, capital, and productivity growth. Formal firms confront higher labor costs, while informal firms face higher capital costs and lower productivity. Informality, regulations, migration and economic growth are all interlinked, and government intervention should be in the form of making formal organization more attractive.
    Norman Loayza
  13. Building State Capability
    Articulating a reasonable policy is one thing; actually implementing it successfully is another. Rarely is there a follow-up on who will implement these “implications,” or if an administration charged with implementing any policy can actually do so, or whether a given policy success or failure actually stems less from the quality of its “design” and more from the willingness and ability of the prevailing apparatus to implement it.
    Michael Woolcock


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