Context | Strategy | Results |

Context

For the past three decades, the private sector has been at the forefront of leading economic growth, job creation, and poverty reduction around the world. Integration with global markets and enhanced private sector competitiveness has contributed to the unprecedented growth of many economies, such as China, Vietnam and Costa Rica. Nevertheless, a large number of developing countries have yet to fully harness their economic potential. Governments are turning to the World Bank for advice on policies to enable and link foreign and domestic private sector with the dynamism generated by cross-border trade and investment patterns. 

Strategy

By leveraging a comprehensive approach that addresses the legal, regulatory, administrative and institutional barriers affecting all phases of the investment and business lifecycle, the Bank Group helps countries establish a competitive investment climate (IC) that is favorable for enhancing market competition and stimulating investment for business-led growth. Capable of mobilizing a wide range of Bank Group instruments – including advisory services and analytics (ASAs), reimbursable advisory services (RASs), and diverse lending products – to help developing countries, our experts on competition policy, indicator-based reform, business regulation, and investment policy and promotion to deliver integrated investment climate solutions founded on four pillars:

  1. Driving Evidence-Based Reform: Global benchmarking knowledge products, such as the Doing Business project, have put business regulation reforms at the forefront of policy-makers’ agendas and created strong demand for support in this area. Underpinning all our IC interventions are a well-developed set of diagnostic instruments, applied research and strong knowledge of good practices and reform experiences. This knowledge set allows our teams to mobilize expertise on a wide-range of policy and regulatory issues, and create integrated, multi-instrument solutions that are tailored to the needs and demands of clients. 

  2. Fostering Business Competitiveness: Unlocking private sector-led growth is contingent on a country’s ability to establish a regulatory and institutional framework that enables local and foreign firms to invest, form and grow, both domestically and internationally. In fact, government policies and regulations play a decisive role in stimulating business activity.  With this aim, IC solutions are designed to improve the regulatory environment for firms along all phases of the investment and business lifecycle. By supporting the implementation of transparent, inclusive and efficient policies and regulatory practices, the IC team helps governments unlock opportunities for developing the private sector, reducing the uncertainties of day-to-day business activities, which in turn incentivize firms to invest, compete and grow.

  3. Expanding Investment Opportunities: To ensure sustainable local development, the challenge for countries lies in linking private investment, especially foreign direct investment (FDI), with locally-owned and managed businesses. In the hopes of fostering these linkages, many countries resort to implementing distortive policies – such as local content performance requirements – that foreign companies must comply with as conditions for investing and doing business in a particular location. These policies, however, can be counterproductive to the goal of leveraging FDI to drive employment and growth. Helping countries ensure that their IC frameworks are attuned to maximizing the domestic economic and social benefits resulting from private investments, our policy interventions are designed to enhance the participation of high-potential domestic firms in global value chains, which dominate the production of goods and services consumed worldwide.

  4. Promoting Competition to Foster Level-Playing Field: Many markets in developing countries do not yet fully benefit from healthy and effective competition. At the regional, national and subnational levels, sector-specific rules and regulations frequently limit entry of new firms, reinforce the dominance of existing businesses, and fail to provide a level playing field.  Furthermore, state-owned enterprises (SoEs) are often significant market participants and may benefit from unfair competitive advantage. Reforms that reduce or eliminate these distortions facilitate entry of new firms, expansion of efficiently operating firms, and increased benefits to consumers.

Recognizing that governments often have a small window of opportunity for reform, the WBG offers a unique response platform which allows our IC team to respond swiftly to client demands, leveraging expertise from across the Bank Group to deliver integrated, multi-instrument solutions. Given that the successful implementation of IC reforms requires the coordinated effort of many different line ministries and agencies, our team works hand-in-hand with governments to design IC reform programs in the context of a broader competitiveness agenda; determine priority areas for reform in the short, medium and long term; set clear targets with measurable results; and strengthen the institutional capacity of public-private dialogue mechanisms and inter-ministerial reform committees.

Results

  • Guinea: Against the backdrop of political instability and the Ebola crisis, with the help of the WBG, the Government of Guinea was able to implement an ambitions IC reform program aimed at improving the country’s business environment, encouraging domestic linkages with its $30 billion mining sector, and diversifying its sources of Foreign Direct Investment (FDI) and growth. Buttressed by our IC interventions, Guinea was able to attract more than $710 million in non-mining investment, register more than 13,000 new firms, and create more than 16,000 jobs during the life of the project.

  • Kenya: The World Bank Group has been advising the government of Kenya on competition tools to break up cartels in key economic sectors. With the implementation of these tools, anticompetitive agreements will be stopped and prevented, generating private savings for firms and households. Already, 11 financial services and 7 agribusiness associations have come forward to openly align their conduct to competition law and stop information exchange that could facilitate collusion. Estimates indicate savings of about $18 million annually in insurance markets alone. In addition, sector-specific work in agribusiness has helped unlock key markets that were closed to private investment because of statutory state monopolies.

  • Albania: Since 2014, Albania has implemented 11 reforms in seven areas of Doing Business ranging from construction permitting to getting an electricity connection. The lifting of a moratorium on construction permits in 2016 helped lift the countries Doing Business ranking by 80 positions—from 186th in 2016 to 106th in 2017. Further reforms since then – including in areas such as contract enforcement and insolvency – have further pushed Albania’s global rank to its current 63rd position.

Research Highlight: Investor Surveys in Middle Income Countries is Underway

The Investment and Competition unit of the Macroeconomics, Trade, and Investment Global Practice is carrying out investor surveys in middle income countries, covering Brazil, China, India, Indonesia, Malaysia, Mexico, Nigeria, Thailand, Turkey, and Vietnam. The survey aims to capture perceptions of existing foreign investors on the impact of global megatrends and the role of investment climate factors on investment behavior. The survey is designed to generate results that are representative at the country-level and comparable across countries. The results of the interviews will be used by the World Bank Group to assist governments in emerging markets to improve their business environments and make it easier for investors to operate and prosper in these markets.

More information available on: http://www.investorsurvey.net/

Last Updated: Oct 09, 2019






EXPERTS

Christine Qiang

Practice Manager, Investment Climate