PSD Blog - The World Bank Group

Hooray for vacation

PSD Blog will be quiet until January 3rd. In this time of reflection (or rampant consumerism, depending on your perspective), a look at the posts that seemed to hit a nerve this year. In no particular order...

• World Cup, economics and development
• Enterprising ethnic minorities
• Parking tickets, diplomats and corruption
• What is fair trade for?
• Evacuation

See you in 2007. In the meantime, here's a good spot for your resolutions.

Adventure driving: why infrastructure matters

I keep bumping into this series of photos of the world's most dangerous roads. And each time I'm amazed. For the sake of the 200,000 residents of Yakutsk, Siberia, I hope the federal-highway-o-mud was a one-time occurence.

Related...our toolkits on private sector participation and performance-based contracting in highways.

Size matters – but what about ownership?

Think you know the world’s largest and most powerful companies? A new list in the Financial Times might make you think again.

The FT Non-Public 150, based on McKinsey research, provides an interesting insight into the shadowy world of private and state ownership, ranking the firms by estimated market value. Not surprisingly state-owned oil companies dominate the top of the list – only Japan Post breaks their hold on the top ten. So, who tops them all? Saudi Aramco - worth an estimated $781bn. Compare that to the paltry $454bn market capitalisation of ExxonMobil, which sits atop lists of publicly traded firms.

The exercise makes for fun headlines, but also raises crucial issues over the relative merits of different forms of ownership and the implications for ensuring good corporate governance and maximizing value. Non-public firms are increasingly influential – see the presence of 6 buy-out firms in the top 30 of this list - but it does not mean they necessarily offer better value. See the accompanying FT article for more.

Formalization vs. preserving livelihoods

Our debate on enterprise formalization continues.

Jan Loprick has dispatched himself to Liberia where he has been pondering whether this agenda makes sense when almost the entire economy is informal and the most pressing need is to preserve livelihoods and find employment for recently demobilized soliders. His answer is a tentative yes, provided policy-makers concentrate on linking formalization to tangible benefits (e.g. access to markets, practical security of land tenure) and ease up on enforcement. From Jan:

Sure, capacities are very limited in Liberia but sometimes small carrots might be sufficient. For small scale miners a reliable claim to their mining parcel might be reason enough to get a mining license and comply with tax requirements.

Evacuation

We've been evacuated from Chad again. I didn't get rushed out of the country, I was already abroad, but that doesn't make it any easier. Rebels approaching N'Djamena, streets swarming with military, continued reports of battles in the east, the future like a knife about to break skin.

What was supposed to be a two week trip for me now may become months of displacement. Last time this happened I roamed the world working on various projects: I grew weary of hotel rooms, the same five shirts and three pairs of dress pants, new countries and languages every few weeks. My Chadian colleagues were evacuated for a week, but now they're back and they call me: "No, things are calm in the capital, it's OK, come back." I don't have much context to understand this.

Now begins the rather painful process of managing a program remotely.

Brazilian education gets failing grade

Brazil's scores on international tests of education have been dismal for years. Businesses have no choice but to fill in the gap with on-site remedial education, according to the Christian Science Monitor. At one furniture maker located outside Sao Paulo,

so many employees were having trouble with everyday tasks that managers set up a classroom in the middle of the factory floor to provide impromptu lessons. "When we see that someone can't do something, we take them straight to the classroom and try to explain it...It is common to see people who can't read or write or fill in forms. They have finished secondary school but they can't add without a calculator or fill in a form."

Why isn't Africa attracting portfolio investment?

Why do the global emerging market funds ignore African-listed securities? Are mutual funds discriminating against Africa?

Not at all, said Todd Moss from the Center for Global Development in a presentation on his recent work to Bank staffers yesterday. Turns out there's no market failure at all. The problem lies with the African stock exchanges themselves.

Read up on annuities and microinsurance

We've just launched two new reading lists:

• Microinsurance. Credit isn't the only financial service to go micro. Poor people face more risks than most of us, with more devastating consequences. Microinsurance products help them handle extreme weather, illness, and loss of livestock. It can also be a crucial way to keep people from falling into poverty in the first place.
• Annuities. With the greying of the population in many parts of the world, lots of people approaching retirement age. Thanks to reformed pension systems, many will receive a lump sum instead of monthly payments. Annuities solve the problem by offering a lifetime steady stream of income.

See Pienso for more microinsurance links.

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Our sponsor, the World Bank Group's Rapid Response unit, is running an online survey. It only takes a few minutes, and you might win an iPod nano (the RED version, naturally).

Click here for the survey, please. Hint: we like you.

Do remittances help or hurt El Salvador?

El Salvador recently became the 11th country to sign a compact with the US Millennium Challenge Corporation. Marcela Sanchez at the Washington Post considers whether the $461 million agreement will reduce Salvadoran dependency on an annual diet of $2.8 billion in remittances. From her article over the weekend:

Carlos Castro, a Salvadoran community leader and owner of a Hispanic specialty supermarket in Northern Virginia, is dismayed that El Salvador now has to import workers from other Central American countries because some Salvadorans don't see a need to work and rely instead on monthly checks from relatives abroad. He further laments the consumerism that has Salvadoran immigrants working hard at tough jobs to pay for "a pair of the latest name-brand shoes" demanded by their kids back in El Salvador.

A World Bank remittances expert, Pablo Fajnzylber, had this to say in an online chat last month:

In fact, we find that poor families in most of the Latin American countries for which we have data, when they receive remittances, they spend a higher percentage of their income in human development, that is, in education and health--than families with similar levels of income and demographic characteristics that don't receive remittances. So, in practice, remittances are used for human development, and we find kids from families that receive remittances stay a longer number of years in school, and their families also have access to better quality health services, so there is, in practice, naturally a positive effect on human development.