General trends in competition policy and investment regulation in mandatory defined contribution markets in Latin America

Following Chile's pension reform in 1981, a wave of multi-pillar pension reforms took place in Latin America (LAC). Their implementation has revealed new policy challenges. To shed light on these issues, this paper reviews the structure and performance of mandatory DC pillars in LAC. The review highlights three important points. First, it suggests overall positive outcomes from reforms in the LAC countries that implemented multi-pillar pension systems. There is, however, scope for increasing efficiency. Second, management fees have declined but remain relatively high whereas decreases in operational costs have only been partially passed through to consumers reflecting inadequate competition. Limits on transfers and related measures have been ineffective in curtailing management fees but created new barriers to entry. In recent years, a few countries inLAC introduced or are in the process of introducing a combination of new measures that focus more directly on the two root causes of inadequate competition - the inelasticity of demand to fees and selective elimination of barriers to entry by facilitating unbundling of services. These new measures show some promise. Third, the paper's review indicates that a greater diversification of pension fund portfolios in LAC appears to be necessary. Portfolio concentration owes to the adoption of strict quantitative investment regulations, underdeveloped capital markets and volatile macroeconomic environments. A gradual relaxation of these restrictions is now in progress in several countries. Regulators have become more conscious of the costs imposed by such regulations and macroeconomic conditions have improved. Greater overseas diversification seems inevitable given the development stage of local capital markets.Debt Markets,,Emerging Markets,Access to Finance,Investment and Investment Climate

Czech pensionsystem : challenges and reform options

The purpose of the paper is to review the structure and performance of the Czech pension system and examine alternative reform options. The paper shows that in the absence of reform the deficits of the Czech pension system may exceed 8 percent of GDP in 2050. To contain these deficits the paper explores two major pay-as-you-go (PAYG) reform options. The first major option is a standard parametric reform that preserves the defined benefit (DB) scheme. The second major option involves parametric reforms combined with a switch to a notional defined contribution (NDC) scheme. The paper shows that the NDC cum parametric reforms would automatically tighten the link between contributions and benefits and be more resilient to unpredicted demographic shocks. However, both the DB and the NDC options would produce a significant reduction in replacement rates, especially for young generations. To avoid an excessive drop in replacement ratios the authorities should make an effort to increase coverage of the third pillar and improve the regulatory framework for third pillar funds. The authorities may also have to consider introducing a second pillar to ensure universal coverage, especially of young workers. Introducing a second pillar will be easier if the PAYG reforms start immediately. This is because an early implementation of the PAYG reforms would produce a significant improvement of the PAYG and offset at least partly the revenue losses arising from the diversion of contributions to the second pillar.Pensions&Retirement Systems,Environmental Economics&Policies,Banks&Banking Reform,Economic Theory&Research,Health Monitoring&Evaluation

Sri Lanka's migrant labor remittances : enhancing the quality and outreach of the rural remittance infrastructure

Remittances-money sent home by immigrant workers abroad-are hugely beneficial to Sri Lanka. Migrants'remittances have grown dramatically in recent years and are now estimated at US$1.5 billion annually. This national phenomenon is consistent with remittance trends in neighboring countries where remittance flows are growing as rapidly. The trend is likely to continue as many workers continue to look abroad for the chance to make a better living. The economic policy implications of these trends are significant. The Sri Lankan Central Bank is now debating the following key issues: the developmental impact of remittances; the high transaction costs associated with remittances; and the level of transparency and accountability in the remittance industry, especially the informal remittance sector. This paper highlights the key policy issues associated with each of these aspects of remittances with the objective of improving the public and private infrastructure for current and future flows. Building on recent World Bank research on remittances that prominently features South Asia, it has been prepared in recognition of the development potential of these flows. It discusses some of the key issues relating to the remittance industry in Sri Lanka. This paper complements the existing literature on migrant labor remittances to Sri Lanka and extends that literature by providing specific policy-relevant guidance on short and long-term policies for enhance enhancing the quality and outreach of rural remittance infrastructure.Banks&Banking Reform,Technology Industry,Gender and Development,Financial Intermediation,Economic Theory&Research

Sri Lanka's Migrant Labor Remittances: Enhancing the Quality and Outreach of the Rural Remittance Infrastructure

Remittances-money sent home by immigrant workers abroad-are hugely beneficial to Sri Lanka. Migrants' remittances have grown dramatically in recent years and are now estimated at US$1.5 billion annually. This national phenomenon is consistent with remittance trends in neighboring countries where remittance flows are growing as rapidly. The trend is likely to continue as many workers continue to look abroad for the chance to make a better living. The economic policy implications of these trends are significant. The Sri Lankan Central Bank is now debating the following key issues: the developmental impact of remittances; the high transaction costs associated with remittances; and the level of transparency and accountability in the remittance industry, especially the informal remittance sector. This paper highlights the key policy issues associated with each of these aspects of remittances with the objective of improving the public and private infrastructure for current and future flows. Building on recent World Bank research on remittances that prominently features South Asia, it has been prepared in recognition of the development potential of these flows. It discusses some of the key issues relating to the remittance industry in Sri Lanka. This paper complements the existing literature on migrant labor remittances to Sri Lanka and extends that literature by providing specific policy-relevant guidance on short and long-term policies for enhance enhancing the quality and outreach of rural remittance infrastructure