The private sector is the main engine of economic growth and an essential player in generating investment, creating jobs, and fostering inclusive and sustainable economies. The global economy needs to be creating between 9 million and 12 million jobs per year in key developing regions if the Twin Goals are to be achieved by 2030. Increased South-South investment has driven net private capital flows to developing countries to roughly $1 trillion per year, but the investment tends to be concentrated in a small number of middle-income countries and sectors. To promote private sector investment, spur job-creating growth, and foster business sectors that can complete in the global marketplace, developing countries must implement laws, policies, and regulations that remove bureaucratic hurdles, encourage investment and business innovation, promote competition, and strengthen key economic sectors.
The FIAS strategy seeks to help clients develop a robust and responsible private sector that contributes to development solutions in many areas, encompassing inclusive growth and poverty reduction, jobs, service delivery, food security, climate change mitigation, and environmental sustainability. FIAS supports the World Bank Group in delivering advisory services and technical assistance that help client countries develop the analytics and data they need to make informed economic policy decisions, and then supports them in implementing policies that encourage inclusive growth, spur foreign and domestic investment, and foster more business competition domestically and more competitive economic sectors in international markets. The strategy rests on three pillars:
1. Improve the business environment. The objective under this pillar is to improve regulations in areas such as starting a business, getting credit, protecting investors, obtaining construction permits. Key results include reducing the cost and time involved in starting a business, and easing uncertainty for businesses and investors.
2. Expand market opportunities. Work under this pillar entails streamlining foreign direct investment entry and defining performance-based investment incentives, strengthening investment promotion and protection frameworks, and improving outreach to promote both domestic and foreign investment in key sectors.
3. Strengthen firm competitiveness. More productive and competitive firms can seize opportunities in local, regional, and global markets and drive economic growth. FIAS-supported work in industry solutions supports policies that help businesses invest in improved products, use climate-efficient technologies, and modernize production processes. This pillar also supports clients in skills development for firm competitiveness to identify and enhance skills available to businesses in those sectors with the highest potential for growth and innovation.
The three FIAS strategic pillars are supported by four programmatic themes that run across all FIAS-supported projects. These are: gender and inclusion; transparency, political economy, and sustainability of reforms; green competitiveness; and targeting high-growth businesses.
- FY17 marked the first year of the new FY17–21 strategy cycle. First-year results include 61 reforms in 32 client countries and territories, exceeding the yearly target of 55 reforms. More than half the reforms were achieved in IDA countries, and FIAS supported projects in 23 out of the world’s 40 fragile and conflict-affected states.
- Doing Business 2018 lists 10 countries as most improved in terms of reforms undertaken; 6 of these—El Salvador, India, Kosovo, Malawi, Uzbekistan, and Zambia—recorded reforms in FY17 from FIAS-supported projects. India and Malawi made the top-improvers list for the first time.
- These results continue the momentum of the FY12–16 strategy cycle during which FIAS helped bring about 331 reforms improving the investment climate of client countries. These have taken place in 81 countries—three quarters in IDA and two-thirds in Sub-Saharan Africa—across all developing regions.
- FIAS-supported teams, working with foreign investors and client countries, helped bring about $1.59 billion in private sector investment in specific development projects over the previous strategy cycle, and added $153 million in new investment generated in FY17.
- FIAS is providing critical support to the World Bank Group’s efforts to increase opportunity for women investors, entrepreneurs, and workers by reform of discriminatory laws and regulations and removal of implementation gaps. To do this work effectively, a new gender team has been established at headquarters to improve gender programming and project-related activities. The program has helped raise awareness of gender issues among staff and incentivize gender-sensitive project design and encourage embedding and piloting gender-related elements into the project portfolio. Initial activities have included dissemination of a Gender Practice Note to FIAS-supported teams outlining an ambitious program of gender-focused and gender-informed projects and initiatives.
- In India, as part of the government’s ambitious “Make in India” economic growth campaign, FIAS is supporting work by the Bank Group’s Investment Climate team in promoting business reforms in India through streamlining regulations, policies, procedures, and practices, with the objective of drastically reducing the burden on business of complying with regulation. Because of India’s federal make-up, business regulation is implemented at multiple levels of jurisdiction—federal, state, and municipal. Therefore, the Ease of Doing Business program involves reform work at regional and local levels as well as in the central government.
- In the Great Rift Valley region of Kenya, the FIAS-supported Competition Policy team has helped create a market for a new product: purple tea. This new specialty variety is thought to have even greater health benefits than green tea. But initial resistance among producers prevented purple tea production factories from opening. The Bank Group helped the Competition Authority of Kenya make the case that purple tea could boost income for farmers by fetching higher prices than other tea varietals. From no purple tea producers a few years ago, the industry now boasts five producers that directly employ over 2,000 workers. These producers include small and medium sized enterprises (SMEs). Purple tea now appears on supermarket shelves and café tables from Kenya to China, Japan, the United States, and Europe.
- In Punjab, Pakistan, FIAS has helped develop a new domestic market for energy efficient fans by working with local authorities, national regulators, and large, medium and small manufacturers on the initiative. Fans are how Pakistanis keep cool, whether ceiling fans, window fans, area fans, or more sophisticated ventilation systems. The use of energy efficiency labels, and a public awareness campaign on the ability of new fans to deliver high quality while also saving energy, is creating a new market for one of Pakistan’s most widely used appliances. In the early stages alone, wide use of fans that meet the energy efficiency standard will save the country an estimated 800,000 kilowatt hours—the equivalent of the annual energy use of about 600 domestic refrigerators—and reduce greenhouse gas emissions by about 400 tons per year. With the success of this pilot program, the project is now working with the regional government to put an additional one million fans into service.