Regulatory Reforms for Improving the Business Environment in Selected Asian Economies - How Monitoring and Comparative Benchmarking Can Provide Incentive for Reform

The determinants of a business friendly environment that underpin rapid and sustained economic growth include the macroeconomic and financial market environments, infrastructure, labor market skills and efficiency, and governance and institutions. Obtaining licenses and credit to start a business, finding and managing labor, ensuring investor protection, enforcing contracts, paying taxes, trading across borders, and identifying the requirements for closing a business are all important factors in assessing the operating climate for doing business. By comparative benchmarking, this paper examines these determinants in six developing Asian economies—the People’s Republic of China, Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam—and compares them with similar indicators for five benchmark economies—the newly industrialized economies (NIEs) of Hong Kong, China; the Republic of Korea; and Singapore; and the developed economies of Japan and the United States. This paper also identifies areas where reform has taken place and where further efforts are needed, such as addressing policy uncertainties, the quality of governance and legal and institutional frameworks, and inadequate regulatory capacity. Attending to these shortcomings will require policymakers to implement structural reforms that improve efficiency and competitiveness by (i) minimizing unnecessary regulatory barriers in business activities, (ii) encouraging private incentives and market discipline, (iii) creating a level playing field across all sectors, and (iv) fostering competition to upgrade institutional capacity. This paper argues that the regular monitoring of relevant indicators and comparative benchmarking can (i) provide important incentive structures that encourage the sharing and implementation of good practices through peer pressure mechanisms and (ii) serve as a starting point for dialogue between government and the private sector on reform priorities that can improve the business environment.Business environment; investment; Asia; benchmarking

"Obedient Servant or Runaway Eurocracy? Delegation, Agency, and Agenda Setting in the European Community"

Do supranational institutions matter - do they deserve the status of an independent causal variable - in EC policymaking? Does the Commission matter? Does the European Court of Justice? Does the European Parliament? Is the European Community characterized by continued member state dominance, or by a runaway Commission and an activist Court progressively chipping away at this dominance? These are some of the most important questions for our understanding of the European Community and of European integration, and have divided the two traditional schools of thought in regional integration, with neofunctionalists [Haas 1958; Lindberg & Scheingold 1970] generally asserting, and intergovernmentalists [Hoffmann 1966; Taylor 1983; Moravcsik 1991, 1993] generally denying, any important causal role for supranational institutions in the integration process. By and large, however, neither neofunctionalism nor intergovernmentalism1 has generated testable hypotheses regarding the conditions under which, and the ways in which, supranational institutions exert an independent causal influence on either EC governance or the process of European integration. This paper presents a unified theoretical approach to the problem of supranational influence, based largely on the new institutionalism in rational choice theory. Simplifying only slightly, this new literature can be traced to Shepsle's [1979] pioneering work on the role of institutions in the US Congress. Beginning with the observation by McKelvey [1976], Riker [1980] and others that, in a system of majoritarian decisionmaking, policy choices are inherently unstable, "cycling" among multiple possible equilibria, Shepsle argued that Congressional institutions, and in particular the committee system, could produce structure-induced equilibrium, by ruling some policy alternatives as permissible or impermissible, and by structuring the voting and veto power of the various actors in the decisionmaking process

Trojans in Early Design Steps—An Emerging Threat

Hardware Trojans inserted by malicious foundries during integrated circuit manufacturing have received substantial attention in recent years. In this paper, we focus on a different type of hardware Trojan threats: attacks in the early steps of design process. We show that third-party intellectual property cores and CAD tools constitute realistic attack surfaces and that even system specification can be targeted by adversaries. We discuss the devastating damage potential of such attacks, the applicable countermeasures against them and their deficiencies

A Statistical Mechanical Load Balancer for the Web

The maximum entropy principle from statistical mechanics states that a closed system attains an equilibrium distribution that maximizes its entropy. We first show that for graphs with fixed number of edges one can define a stochastic edge dynamic that can serve as an effective thermalization scheme, and hence, the underlying graphs are expected to attain their maximum-entropy states, which turn out to be Erdos-Renyi (ER) random graphs. We next show that (i) a rate-equation based analysis of node degree distribution does indeed confirm the maximum-entropy principle, and (ii) the edge dynamic can be effectively implemented using short random walks on the underlying graphs, leading to a local algorithm for the generation of ER random graphs. The resulting statistical mechanical system can be adapted to provide a distributed and local (i.e., without any centralized monitoring) mechanism for load balancing, which can have a significant impact in increasing the efficiency and utilization of both the Internet (e.g., efficient web mirroring), and large-scale computing infrastructure (e.g., cluster and grid computing).Comment: 11 Pages, 5 Postscript figures; added references, expanded on protocol discussio

An introduction to financial and economic modeling for utility regulators

The most effective regulators in developing countriesare following remarkably similar approaches. The main common element across"best practice"countries is the use of relatively simple quantitative models of operators'behavior and constraints to measure the impact of regulatory decisions on some key financial and economic indicators of concern to the operators, the users, and the government. The authors provide an introduction to the design and use of these models. They draw on lessons from international experience in industrial and developing countries in ordinary or extraordinary revisions and in the context of contract renegotiations. Simplifying somewhat, these models force regulators to recognize that, in the long run, private operators need to at least cover their opportunity cost of capital, including the various types of risks specific to the country, the sector, or the projects with which they are involved. Because these variables change over time, scheduled revisions are needed to allow for adjustments in the key determinants of the rate of return of the operator. These revisions are a recognition of the fact that all these determinants-tariffs, subsidies, quality, investments, and other service obligations-are interrelated and jointly determine the rate of return. At every revision, the rules of the game for the regulator are exactly the same: to figure out the changes in the cost of capital and to adjust the variables driving the rate of return to ensure that it continues to be consistent with the cost of capital. If they can draw on reasonable data, these models do everything any financial model would do for the day-to-day management of a company but take a longer term view and include an explicit identification of the key regulatory instruments. They can monitor the consistency between cash flow generated by the business on the one hand and debt service and operational expense needs on the other to address the main concerns of the operators. They can also account for a large number of key policy factors including access and affordability concerns for various types of consumers. They generally account for the sensitivity of operators and users to various regulatory design options.Payment Systems&Infrastructure,Economic Theory&Research,Decentralization,Environmental Economics&Policies,Enterprise Development&Reform,Public Sector Economics&Finance,Environmental Economics&Policies,Economic Theory&Research,Banks&Banking Reform,Municipal Financial Management

Corruption and Pro-Poor Growth Outcomes: Evidence and Lessons for African Countries

There is growing consensus that corruption hurts economic performance by reducing private investment, adversely affecting the quantity and quality of public infrastructure, reducing tax revenue, and reducing human capital accumulation. In addition to inefficiency effects—lower growth for a given endowment in factors and technology—corruption also has adverse distributional effects as it hurts the poor disproportionately. For a given level of government budget and national income, high corruption countries have lower literacy rates, higher mortality rates, and overall worse human development outcomes. Corruption deepens poverty by reducing pro-poor pubic expenditures, creating artificial shortages and congestion in public services, and inducing a policy bias in favor of capital intensity, which perpetuates unemployment. High levels of corruption in African countries constitute one of the factors behind slow growth and limited progress in poverty reduction. Eradicating corruption in African bureaucracies is a challenging task, especially because it is a systemic phenomenon with effects that often lag far behind the causes. Therefore, explicit strategies are necessary to change the incentive structure by modifying the payoffs and sanctions that govern the interactions between bureaucrats and private economic operators. Strategies to fight corruption include measures to increase transparency in the management of public resources, establishing an incentive structure that rewards honest behavior among civil servants, enforcing transparency in international contracts and equal penalties to all parties to corrupt deals, and promotion of a free and responsible media.Corruption; pro-poor growth; rent-seeking; African countries

XRay: Enhancing the Web's Transparency with Differential Correlation

Today's Web services - such as Google, Amazon, and Facebook - leverage user data for varied purposes, including personalizing recommendations, targeting advertisements, and adjusting prices. At present, users have little insight into how their data is being used. Hence, they cannot make informed choices about the services they choose. To increase transparency, we developed XRay, the first fine-grained, robust, and scalable personal data tracking system for the Web. XRay predicts which data in an arbitrary Web account (such as emails, searches, or viewed products) is being used to target which outputs (such as ads, recommended products, or prices). XRay's core functions are service agnostic and easy to instantiate for new services, and they can track data within and across services. To make predictions independent of the audited service, XRay relies on the following insight: by comparing outputs from different accounts with similar, but not identical, subsets of data, one can pinpoint targeting through correlation. We show both theoretically, and through experiments on Gmail, Amazon, and YouTube, that XRay achieves high precision and recall by correlating data from a surprisingly small number of extra accounts.Comment: Extended version of a paper presented at the 23rd USENIX Security Symposium (USENIX Security 14

Regulating Complexity in Financial Markets

As the financial crisis has tragically illustrated, the complexities of modern financial markets and investment securities can trigger systemic market failures. Addressing these complexities, this Article maintains, is perhaps the greatest financial-market challenge of the future. The Article first examines and explains the nature of these complexities. It then analyzes the regulatory and other steps that should be considered to reduce the potential for failure. Because complex financial markets resemble complex engineering systems, and failures in those markets have characteristics of failures in those systems, the Article‟s analysis draws on chaos theory and other approaches used to analyze complex engineering systems