Policy, Research working paper series : numbers 1248-1280

This paper contains a numerical listing of working papers prepared by the Policy, Research Complex. Each citation contains a brief abstract, and the contactpoint for the paper.Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,ICT Policy and Strategies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

Policy, Research working paper series : numbers 1281-1302

This paper contains a numerical listing of working papers prepared by the Poilicy, Research Complex. Each citation contains a brief abstract, and the contact point for the paper.Public Sector Economics&Finance,Municipal Financial Management,Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research

Human and physical infrastructure : public investment and pricing policies in developing countries

Almost by definition, the basis for development is infrastructure - whether services for human infrastructure (health, education, nutrition) or physical infrastructure (transport, energy, water). Although the infrastructure sectors are diverse, what they have in common is that public policy has had a great deal to do with how these services are provided and financed in almost all countries. The author reviews the recent literature on two key aspects of that involvement: investment and pricing. While the quality of the econometric evidence varies, recent literature reinforces the view that human and physical infrastructure are critical for economic growth and the reduction of poverty. And the state is recognized as playing a key role in ensuring the efficient, equitable allocation of resources for infrastructure. Despite many sound theoretical reasons for such public involvement, however, recent studies have shown that it leaves much to be desired in efficiency and equity. One symptom is underinvestment in key subsectors that have high economic returns and that help the poor the most, such as primary education and rural health clinics, in relation to more expensive interventions, such as tertiary education and urban hospitals. Another common malaise is the poor use of scarce resources, leading to low quality (students learning little) and reliability (irregular power and water flows), poor maintenance (dilapilated roads), and inappropriate input use (too many school adminstrators or health workers and not enough books or drugs in producing education health outcomes). Just as market failures necessitate government intervention in the infrastructure sectors, so government failures should be considered in deciding the depth and extent of that intervention. The literature has made some advances in diagnosing these problems in poor countries and proposing solutions. But information gaps remain, particularly in developing robust methodologies for: 1) making intersectoral comparisons across the wide range of infrastructure services; 2) crafting more diverse policies about the public-private balance in infrastructure investment, depending on the nature of"public goods"characteristics for various types of infrastructure services, or even across activities for the same service (for example, power transmission versus distribution); and 3) taking issues of political economy into account, such as the vested interests of those with large financial interests in infrastructure. The author also highlights public pricing as a policy initiative that has recently gotten much attention.After briefly reviewing the basic concepts of pricing, he focuses on the literature about pricing reform. Most commonly, the public sector is the main provider of infrastructure services, usually free or at subsidized prices. But the recent literature has aired a rethinking of the balance between public and private financing of infrastructure. The debate in this area is often heated. Health and education are traditionally provided free and some recent literature argues for positive prices, at least for higher tiers of service. The principle of public pricing has been more widely accepted in transport, energy, and to a lesser extent water, but often the levels are too low and do not provide the appropriate incentives for efficient and equitable use.Environmental Economics&Policies,Banks&Banking Reform,Health Monitoring&Evaluation,Public Sector Economics&Finance,Economic Theory&Research

Developing countries and the Uruguay Round : negotiations on services

In the late 1980s many developing countries experienced something of a pardigm shift: governments began to pursue more market-oriented domestic policies. There was an increasing perception that liberalizing access to service markets was a potentially low-cost, effective method for improving the quality and efficiency of domestic service sectors. These unilateral policy developments increased the incentives for developing countries as a group to participate in a multilateral agreement to liberalize trade in services. The author explores the extent to which the initial negotiating positions of developing countries are reflected in the draft General Agreement on Trade in Services (GATS) that has emerged from the Uruguay Round negotiations. He investigates whether the unilateral policy changes implemented by many developing countries in the late 1980s had a discernible impact on the draft GATS for developing countries. Many developing countries are pursuing regulatory reform and liberalization. To what extent will signing the GATS help governments trying to make their service sectors more efficient? Is the result of the defensive negotiating strategy that was pursued consistent with the shift toward a policy of liberalizing service markets? This issue is of particular relevance insofar as recent liberalization-plus-privatization programs in developing countries were driven by external forces rather than domestic pressure (industry) groups - which might reduce the credibility of liberalization policies. Membership in a binding multilateral agreement could help bolster reform efforts by increasing the costs of backsliding.Trade and Services,Poverty Assessment,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Governance Indicators,Rules of Origin

Trade, aid, and investment in sub-Saharan Africa

Trade, aid, and investment are more inextricably linked in sub-Saharan Africa than anywhere else in the world, contends the author, whose survey of sub-Saharan Africa's prospects for trade, aid, and investment lead to the following broad conclusions. Developing an outward orientation, improving competitiveness, and recapturing its lost share in world markets offers a higher potential payoff than any other strategy for growth and sustainable development in sub-Saharan countries. If the region had maintained internal competitiveness and retained its 1970 share of world exports, successfully defending against new entrants, its 1990 level of exports would have been at least $50 billion higher than actual earnings - assuming that the composition of sub-Saharan exports would have changed to reflect changes in world trade. If the region continued to rely on exports of commodity products alone, the relative gains would have been much smaller. In the last decade, sub-Saharan Africa has become increasingly dependent on external resource flows for investment, imports, and development. But there is little chance of sustained high levels of aid because of budget constraints in the OECD countries, competing demands from new claimants, and the new conditionalities imposed by bilateral donors (for democratization, reduced military spending, and improved human rights). Most African countries must mobilize domestic resources and increase domestic savings rates by reducing public sector dissavings, the financial losses of public enterprises, and other nonproductive spending. Certain low-middle-income African countries can attract a significant amount of foreign direct investment, but most resource-poor countries - especially in the Sahel and the Horn of Africa - will continue to depend on foreign aid. There must be a more durable solution to Africa's debt problem. Only half of the debt service due can be paid, suggesting the urgent need to reduce the debt stock and thus debt servicing obligations, in alignment with debt servicing capacity. Many current proposals under discussion, if implemented, can bring considerable relief. Several sub-Saharan countries can attractsignificant investment because of their location, low labor costs, natural resource endowments, and the size of their domestic market. But productive investment levels in most African countries have remained depressed, and even where economic policy reform has been implemented, the investor response - both domestic and foreign - has been poor. Uncertainty, fears of policy reversals, lack of credibility and continuity, the contagion effect, and more attractive opportunities elsewhere reinforce such structural weaknesses in sub-Saharan Africa as poor infrastructure, inefficient services, and a weak human resource base to deprive Africa of new investment.Trade Policy,Achieving Shared Growth,Economic Theory&Research,Environmental Economics&Policies,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

Eastern Europe's experience with banking reform : is there a role for banks in the transition?

Are there lessons to be learned about how Eastern European countries have dealt with problems in their banking systems? What role have these countries assigned to banks during the transition? How have they used banks in dealing with the enterprise problem? The author addresses these questions by analyzing experience in Bulgaria, Hungary, Poland, Romania, and the former Czech and Slovak Federal Republic. Most of these countries have made substantial progress in restructuring their banking systems, but few have used their banking systems to improve the allocation of credit and hence stimulate the supply response. The author finds the following. The problem is not whether banks hold nonperforming loans but how banks can avoid accumulating more nonperforming loans. The underlying problem is how to close loss-making and nonviable enterprises. The countries that have encouraged the establishment of new private banks, that have introduced regulation and supervision, and that have tried to make banks more competitive have been more successful at improving the allocation of credit and achieving more control over loss-making enterprises. Banks must focus on assessing risk - and for this, capital, private ownership, and adequate regulation are crucial. How quickly banks achieve independence in credit decisions depends on how fast new governance structures can be introduced. In this, the five countries have been less successful. The objectives of bank recapitulation should be to prevent banks from accumulating more nonperforming loans (that is, dealing with the enterprise problem) and to give them the governance structure that would prevent them from incurring new nonperforming loans. This requires introducing a system of risk and reward - by making banks comply with capital adequacy requirements, by privatizing a critical number of banks, and by introducing strong regulation and supervision. Government should see that banks provide efficient payment systems, the basis for trust in banking systems. Introducing adequate regulation and supervision has been difficult as it requires knowing what the banks'role should be. Evidence strongly supports the need to recapitalize and privatize a critical number of banks. Authorities cannot rely on banks to exert control on enterprises early in the transition. In the early stages, control over state-owned enterprises should be exercised by a semipublic institution.Banks&Banking Reform,Financial Intermediation,Financial Crisis Management&Restructuring,Municipal Financial Management,Banking Law

Implementation of trade reform in sub-Saharan Africa : how much heat and how much light?

Adjustment programs in sub-Saharan Africa have been somewhat less intensive in trade reform than programs in other countries have been. Implementation of trade reform overall, however (but not the most important reforms), has been better in sub-Saharan Africa. Retrogression has also been more frequent. As a group, the intensive adjustment lending countries made significant progress in the 1980s and early 1990s, but there was significant variation among them. For sub-Saharan Africa, progress has been more impressive in recent years then in earlier years. In many countries, adjustment did not begin until the mid-1980s and relatively few measures were implemented up front. For the franc-zone countries, underimplementation rates are lower in the most recent data, and by some - but not all - measures their openness has improved more in recent years. By virtually all measures, however, improvements over earlier periods have not been as great for non-franc zone countries. Reduced protectionwas largely offset by real devaluation in most country groups and, by most measures, incentives to produce import substitutes actually improved in the years immediately after the first adjustment loan. In more recent years, the incentives have fallen modestly. Using a new method for quantifying nontariff protection in terms of tariff equivalence, the author argues that, in general, countries are not in danger of de-industrialization from the rapid disprotection of import-substituting industry. However, franc-zone countries showed greater declines in incentives for import substitution because of their lower rate of real devaluation. One implication may be that their ability to reduce tariffs and nontariff barriers is impeded by their inability to offset them with devaluations as other countries did. Non-franc-zone countries reduced tariff-equivilant protection in recent years by 15 to 49 percentage points more than franc-zone countries. How open are the trade regimes at this point? The decline in tariff-equivalent protection, although not trivial, is insufficient to reduce the protection to moderate levels relative to deep reformers in East Asia and Latin America. The biggest problem is with foreign exchange allocation. Mauritius may be the only non-franc zone sub-Saharan country in which the currency is essentially convertible and has been for some time. This basic reform has not begun in most countries or has only recently been completed (Ghana).Environmental Economics&Policies,Economic Theory&Research,Economic Stabilization,Trade Policy,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT

The significance of the"Europe agreements"for Central European industrial exports

In 1991 and 1992, the European Union (EU) and the economies in transition of Central and Southern Europe - the CEE-5 (Bulgaria, the former Czechoslovakia, Hungary, Poland and Romania) - signed the European Association Agreements. The Agreements established a new framework for their mutual economic relationship, including the transition to a free trade regime for industrial products. The importance of the"Europe Agreements"has been underscored by the rapidly shifting trade patterns between the CEE-5 countries and OECD markets, and by the emergence of the EU as their major trading partner. The author examines the significance of the trade concessions granted by the EU to the CEE-5 countries (1) by analyzing the incidence of EU trade barriers on imports from the CEE-5 before and after implementation of the Agreements and (2) by identifying trade flows of groups of industrial products subject to different concessions.He focuses on trade liberalizing measures for industrial products for which a free trade regime should be in place no later than five years after the Agreements are in force. (Excluded are textiles and clothing, discussed in the Uruguay Round of Trade Negotiations.) Overall, the industrial product trade provisions of the Agreements, which affect about 80 percent of CEE-5 exports to the EU, significantly improve those countries'access to EU markets. In 1992, the first year they were in force in Hungary, Poland, and the former Czechoslovakia, the Agreements freed slightly less than 50 percent of total exports to the EU from import duties and nontariff barriers (NTB's). In terms of the 1992 composition of exports, this"free trade"share in total exports increases over five years to about 80 percent for the former Czechoslovakia, 60 percent for Hungary, and 70 percent for Poland. Although there are significant differences in the composition of exports from CEE-5 economies affected by EU trade liberalizing measures, these are the result of varying shares of sensitive (especially agricultural) products across countries, not dissimilar of concessions from the EU. The EU's negotiation approach, as revealed in the Agreements, was to minimize the adverse effects of opening up"sensitive"sectors: the time and the pace of transition tends to be longer and slower for groups of products with higher NTB-coverage ratios and higher average tariffs. Whether by design or not, the variation in products identified in various provisions assures a more equitable treatment of CEE-5 countries, judging from their industrial export patterns in 1990-92.Economic Theory&Research,Environmental Economics&Policies,Agribusiness&Markets,TF054105-DONOR FUNDED OPERATION ADMINISTRATION FEE INCOME AND EXPENSE ACCOUNT,Trade Policy

The public finance of infrastructure : issues and options

Using economic principles, the author provides criteria for financing infrastructure services where consumption-related user charges can be levied effectively. In light of the suggested criteria, the author examines the experience of developing countries in financing publicly provided infrastructure services in transport (road), water, telecommunications, and power. In developing countries, most infrastructure is provided by the public sector, although the private sector has become increasingly involved. Because it is difficult to raise funds through general taxes, self financing of these services remains a desirable second-best policy, one that almost all developing countries endorse. But experience suggests that, except in telecommunications, full cost recovery is more the exception than the rule. Financing remains inadequate. The political economy of tariff setting is an important element in low improperly designed user charges, infrequent adjustments for inflation, and poor enforcement. Such sectors as water, power, and transportation drains funds from the treasury, although their impact varies from sector to sector. When it is difficult to get budget transfers to materialize - especially during a fiscal crisis - there is often a reduction in nonwage operations and maintenance expenditures. As a result, services deteriorate. The private provision of infrastructure services is often suggested as an alternative. The private provision of services can certainly reduce the public sector's financing requirement. For infrastructure services for which technological advances have made competition possible, the market system could ensure efficient private provision of services, which could be a relief to the public sector. But for services that require a single provider to achieve economies of scale and similar benefits, the private provision of services will work only if an appropriate rate of return is assured - and only if user charges cover costs.Urban Economics,Public Sector Economics&Finance,Environmental Economics&Policies,Town Water Supply and Sanitation,Banks&Banking Reform

Making a market : mass privatization in the Czech and Slovak Republics

The author assesses the Czechoslovak mass privatization program for speed, equity, and corporate governance. The program transferred claims on assets in 1,491 enterprises - assets worth about $10.7 billion - to the 8.5 million citizens who participated in the scheme. The entire cycle of project preparation, public information, and nationwide simultaneous bidding took 14 months. This was equivalent to privatizing more than three medium-scale and large-scale enterprises, on average, per day. Equity objectives were achieved by transferring equal claims (equivalent to about$1,250 per person) to all participants and by putting in place a transparent and decentralized process. The government's role was simple to provide a framework and a set of rules for potential firms, managers, and shareholders to find each other. The scheme's design - based on simultaneous sequential bidding rounds - worked to put information about enterprise values into the public domain by allowing increasingly informed bidders to interact. The structure of ownership that emerged will have very different implications for corporate governance. Enterprises in the Czech Republic, and those that sold for high prices in the bidding rounds, are characterized by a greater concentration of shareholdings. Those in the Slovak Republic, and those that sold for lower prices, have more diffuse ownership structures. The mass privatization scheme served to quickly differentiate the enterprises with favorable prospects from those with unfavorable prospects under current conditions. But enterprises that could have survived in some form, if they had been restructured before privatization, or enterprises that could have been viable but lacked effective governance, were sacrificed for the sake of speed and decentralization.Banks&Banking Reform,International Terrorism&Counterterrorism,Municipal Financial Management,Markets and Market Access,Economic Theory&Research