This assessment of the Basel Core Principles (BCP) was conducted as part of the financial sector assessment program (FSAP) update evaluation of the El Salvador financial system from April 22 to May 10, 2010. The supervisory framework was assessed against the BCP methodology issued in October 2006. The assessment of compliance with each principle is made on a qualitative basis. A four-part assessment system is used: compliant; largely compliant; materially noncompliant; and noncompliant. A largely compliant assessment is given if only minor shortcomings are observed, and these are not seen as sufficient to raise serious doubts about the authority's ability to achieve the objective of that principle. A materially noncompliant assessment is given when the shortcomings are sufficient to raise doubts about the authority's ability to achieve compliance, but substantive progress has been made. A noncompliant assessment is given when no substantive progress toward compliance has been achieved. The ratings assigned during this assessment are not comparable to the ones assigned in the 2000 FSAP, as the bar to measure the effectiveness of a supervisory framework has been raised in the new methodology. This paper is structures as follows: introduction; information and methodology used for assessment; institutional and macroeconomic setting and market structure- overview; preconditions for effective bank supervision; main findings; and recommended action plan and authorities' response.
Capital account liberalization, it is fair to say, remains one of the most controversial and least understood policies of our day. One reason is that different theoretical perspectives have very different implications for the desirability of liberalizing capital flows. Another is that empirical analysis has failed to yield conclusive results. The answer, another influential strand of thought contends, is that this efficient-markets paradigm is fundamentally misleading when applied to capital flows. Limits on capital movements are a distortion. It is an implication of the theory of the second best that removing one distortion need not be welfare enhancing when other distortions are present.
This paper investigates the effect of access to finance on job growth in 50,000 firms across 70 developing countries. Using the introduction of credit bureaus as an exogenous shock to the supply of credit, the paper finds that increased access to finance results in higher employment growth, especially among micro, small, and medium enterprises. The results are robust to using firm fixed effects, industry measures of external finance dependence, and propensity score matching in a complementary panel data set of more than four million firms in 29 developing countries. The findings have implications for policy interventions targeted to produce job growth in micro, small, and medium enterprises.
Private investment in agriculture in developing countries, both domestic and foreign, has been on the rise for nearly two decades. This paper focuses on large-scale agricultural projects in developing countries, involving the lease of farmland, which rose sharply after the food crisis of 2008. It is important that such investments are sustainable not only in the long term, but also beneficial in the short term with minimal risks or negative effects. This paper looks at one approach to achieving this namely, carefully devised contracts with investors, and in doing so offers a number of concrete solutions. This paper marries two substantial bodies of research to show how investment contracts can be set up to promote sustainable development. The paper presents the top five positive outcomes and the five downsides from private sector investments in large scale agricultural projects. This is derived from empirical evidence gathered by the United Nations Conference on Trade and Development (UNCTAD) and the World Bank after visiting large-scale agricultural projects (UNCTAD and World Bank 2014). The paper then proposes legal options to maximizing the main positive outcomes and minimizing the main downsides through better drafting of contracts between investors and governments for the lease of farmland. This derived from work conducted by the International Institute for Sustainable Development (IISD), which studied almost 80 contracts and produced a guide to negotiating contracts for farmland and water, including a model contract.
Kazakhstan made steady progress on poverty reduction and social development during the review period, driven by impressive economic growth and rising hydrocarbon prices. Yet, the country continues to grapple with a number of systemic challenges, including: a lack of progress on economic diversification and anticorruption; a dominant role of the state in the economy; a lack of skills in the labor force; and a legacy of environmental problems inherited from the Soviet era. The quality of the Bank Group dialogue with the government was exceptionally high throughout the evaluation period. The Bank Group has established itself as a trusted adviser to the government, with a proven track record of timely delivery of high-quality technical and policy advice, including cabinet-level 'brainstorming sessions' and the client-funded Joint Economic Research Program (JERP). Implementation of the JERP suggests that it could become a powerful tool for strengthening the partnership, advancing the reform agenda, and gradually building up the lending program. At the same time, the fully demand-driven nature of the program imposed limitations on the Bank in defining strategic priorities in its advisory work, disseminating findings, and engaging local partners. Looking forward, the Bank Group will need to (i) link the JERP with concrete sector investments and advance monitoring and evaluation (M&E) tools to track its effectiveness; (ii) disclose the main policy recommendations; (iii) engage local partners and civil society to advance transparency and accountability and build capacity; (iv) select and prepare of a set of analytical products independently and in line with the World Bank Group's global development mandate; and (v) be more selective and strategic in sector engagement.
There has long been a keen interest from countries around the world in Australia's experience in creating an evaluation system to support evidence-based decision making and performance-based budgeting. Australia's evaluation system lasted from 1987 to 1997, and during that time it was used to systematically evaluate all government programs every three to five years; these evaluation findings were used heavily by officials, ministers and the cabinet in the annual budget process. The uses of these findings included the policy advice prepared by departments including the preparation of ministers' new policy proposals and departments' savings options submitted to the cabinet for its consideration. More importantly, these findings were highly influential on the cabinet's ultimate policy decisions. Finally, evaluation findings were also used widely within line departments in support of their ongoing management. This paper updates two previous World Bank papers that reviewed the Australian experience with monitoring and evaluation (M&E) and other performance-related initiatives. These papers (Mackay 1998, 2004) focused on the first two time periods addressed in this paper.
Overall purpose of the study While literature highlights the growing importance of, and opportunities in, emerging markets (Joosub & Coldwell, 2016; Boateng, Wang & Wang, 2017; Oguji & Owusu, 2017), there is also significant research regarding the risks associated with these markets (Khanna & Palepu, 2010; Luiz & Ruplal, 2013). These risks arise from differences in geographies, cultures, institutions, governance, languages, performance and economic structures, making the internationalisation strategies of African multinationals into other African countries complex and challenging. Despite these difficulties, African countries still promote trade within the continent. The 2018 African Continental Free Trade Area agreement, for example, promotes intra-regional trade in order to stimulate economic activity and increase development on the continent. South Africa, being the most developed economy on the continent, seems to be leading in doing business with other African countries, having a number of its home-grown multinationals internationalising on the continent. Success stories such as MTN, Shoprite, SAB Miller and Pick' n Pay have taken their operations into other countries in Africa, however what is not clear is how they have successfully applied their internationalisation strategies. Unlike research by Boateng et al. (2017) on how Chinese multinationals are using mergers and acquisitions as their entry mode, and Buckley's (2018) findings on Indian firms targeting countries with English as their official language, little research has been conducted on how South African companies are expanding outside their national borders. This research thus sought to explore the processes by which South African companies implement their internationalisation strategies into other African countries. Research problem As firms internationalise, they choose markets that are physically and psychically close based on their internationalisation experience. Previous literature shows that larger firms are better able to absorb the initial cost of internationalisation and opt for a higher degree of control (Dunning, 1988), yet not much research have been done on the African continent to explore how companies deal with psychic distance, firm resources and strategic choice in their internationalisation strategies. Studies conducted outside the continent in psychically distant locations show that firms design boundaries to protect their internal resources and capabilities from unintended spill overs, and look for local partner organisations that wield substantial capability to fill voids (Dunning, 1988). In addition, Barney (1991) argued that firms seek to exploit their rare, valuable and inimitable resources to gain a competitive advantage. Psychic distance research has been conducted on Chinese (Boateng, et al., 2017) and Indian firms (Buckley, 2018), however in Africa, where the cultural, institutional, economic and geographic distances are huge, not much evidence is available. There is also a variety of research on firm resources and strategic choices for Chinese and Indian firms, including how they are using leadership, technical talent, cheap labour (Contractor, 2013), financial resources, government to government relationships (Cheru & Obi, 2011) and home knowledge to enter African markets (Khanna & Palepu, 2010). As some South African businesses have failed in their internationalisation strategies on the continent, it is thus important to understand how those companies that have succeeded, did so. Design of the study A multi-method sequential explanatory approach (Ivankova, Creswell & Stick, 2006), comprised of a survey followed by case studies of internationalising South African companies, was used. The survey participants and firms were purposefully selected based on their roles in the internationalisation strategies, and the results of the survey were used to identify cases for the second phase of the research. An insurer and a bank with a total market capitalisation of R442b (JSE, 2017), representing 41% of the survey population, were selected as case studies. These cases were adopted to understand the internationalisation phenomenon in specific companies, while the research questions focussed on South African multinational enterprises (MNEs) that already had operations in other African markets. Empirical evidence from both the survey results and the two case studies were used to address the research questions. Findings This study revealed that South African multinationals face intense competition from local competitors in the rest of Africa, so they have to craft and adapt specific strategies during their expansions. This research confirmed the findings of previous studies by showing that the internationalisation of banks and insurance companies follow largely similar patterns (Focarelli & Pozzolo, 2008). Further, the case studies indicate complexities such as the need for local legitimacy, the tacitness of local cultures, and protracted implementation periods that cannot be explained by traditional FDI theories. For these reasons, the companies develop non-market resources such as spending periods of time in the potential host country before setting up operations to gather information and build hands-on market intelligence based on the experiential knowledge of the host country market. The bank case study, whose first wave of internationalisation, as with other major banks, was in the late 1800, uses the ownership entry mode. While literature has shown that companies acquire local partners when there are high psychic distances, because bank services require a high degree of information, information transfer and trust (Mulder & Westerhuis, 2015, cited in Fischer & Hasselknippe, 2017), risk management is very important. Firm resources such as good governance and ethical leadership are key for success. This case study revealed that because bank values such as integrity and accountability are global, a subsidiary's aptitude to demonstrate its ability to work within a country culture while retaining the values of the bank earns respect from regulators and customers and increases market share. In addition, it extended research conducted by Contractor (2013) on expatriates and Harvey, Speier & Novicevic (1999)'s findings on diasporas from home countries, by finding that the bank builds a pool of skilled African Diaspora, who are citizens of the host market, to manage and facilitate the integration process and bridge the cultural gap, thereby shortening the transient period. While literature has shown that banks and insurance companies follow similar internationalisation patterns (Focarelli & Pozzolo, 2008), the insurer, an internationalisation latecomer, adopted the partnership entry mode using learnings from "small deals" to achieve its ambition of being the Pan African financial services company. Although literature shows latecomers using entry modes such as mergers and acquisitions (Oguji & Owusu, 2017) and leapfrogging into innovation value chains (Ray, Ray & Kumar, 2017), this particular study indicates that the insurer used the partnership mode to minimise risks caused by the latecomer effect. While the bank has had experience in internationalisation for almost two centuries and has operations in 20 countries, the insurer only actively started internationalising 15 years ago but has operations in 35 countries. Focarelli and Pozzolo (2008) found that accessibility to domestic markets by foreign investors is greater for insurance companies than banks, while this study found that the insurer has greater accessibility to African markets through the adoption of the partnership model, which mitigates the risk of high cultural distances. These findings were not found in the literature reviewed for this study, and therefore offer opportunities for further research. Regardless of whether an ownership-based or a partnership-based model is used, distance and cultural integration are important determinants for both the bank and the insurer (Focarelli & Pozzolo, 2008. Although the cases in this study revealed similar internationalisation patterns, such as starting in psychically close locations (Johanson & Vahlne, 1977), using financial resources to sponsor the protracted implementation of the strategy (Dunning, 1988) and having local management run the business in the host country (Barney, Ketchen & Wright, 2011), they differed in entry mode, timing of entry and decision-making processes. In addition, this study revealed that both companies' inflection points were characterised by a continuous commitment of resources, hoping that they would get signals to either exit or scale up with minimal reputational damage. Contributions to research Theory A major contribution of this research pertains to the new research context of Africa. Most literature have focused on how global companies expanded into emerging markets (Enderwick, 2009; Khanna & Palepu, 2010), and more recently how companies from emerging markets like China and India (Boateng, et al., 2017; Buckley, 2018) have expanded globally. However, little has been done to understand how African corporates tackle such expansions. Africa, with its 56 countries and domestic institutions of a multi ethnic, multi-language (more than 500 for Nigeria alone), multi religious, multicultural and diverse colonial histories, offers a rich setting in which to study the influences of psychic distance and firm resources on internationalisation. The findings based on the African context for South African firms therefore provide important direct and practical implications for firms from other African economies. The conceptualisation of this study provides an insightful lens into the influence of psychic distance, firm resources and strategic choice on internationalisation processes, which is unexplored territory. With scant literature on Africa as an emerging continent, this study provides some empirical and case evidence for these propositions and contributes a basis for further research. Methodologically, this research extends the findings of Luiz and Ruplal (2013) by examining a number of sectors as opposed to a focus on mining companies alone. The research further contributes to a better understanding of internationalisation strategies by incorporating literature, case studies and a survey, as opposed to simply a survey as per Joosub and Coldwell (2016). The choice of case studies presented an opportunity to compare the internationalisation processes of an ownership-based first mover to a partnership-based latecomer, using firm resources as an enabler. Previous studies (Herrmann & Dotta, 2002; Wood, et al., 2011; Williams & Grégoire, 2014) have shown that MNEs send expatriates with international experience to manage operations in host countries. Harvey et al. (1999) provided a more nuanced view by observing that MNEs send people from diasporas to host countries as network agents, given their global consciousnesses and familiarity with the home cultures. This research, however, shows that due to the relationship-rich African cultures and the tacitness of host country knowledge, the bank (ownership model) specifically targeted and upskilled a pool of citizens of the potential host countries at the parent operation, who were subsequently deployed to bridge cultural gaps during implementation, thereby increasing the MNE's internationalisation capability. Emerging market firms' internationalisation is driven by intangible resources based on learning, linking and leveraging (Ray, et al., 2017). Although this study was exploratory in nature, the two case studies have shown a consistent pattern of an adaptive management cycle when setting up operations in other African countries. Due to the huge psychic distance encountered by these companies, they make use of repetitive and protracted planning and implementation processes. This increases the transient period and costs, yet the companies are willing to pay them to protect their reputations until they find signals to either exit or scale up. This finding regarding the existence of a transient period is not apparent in other literature. Even though Zhou and Li (2010), in their study of how strategic orientations influence dynamic capabilities, found that a firm's external interactions with customers and competitors in host countries affect its internal resource assortment and reconfiguration, they did not specifically deal with the issue of a transient period. Previous research indicated that firms look for partner organisations that wield substantial capability to fill voids (Dunning, 1988), that successful partnerships are built on trust which results in greater information sharing (Dyer, 1997), and that the selection of a local partner is informed by robust market assessment (Khanna & Palepu, 2010). This research confirms these findings by showing that spending time in the host country, doing due diligence on partner Board members, and providing a joint cultural induction of both partners' executives in the parent organisation, ensures strategic alignment with partners from the onset. Practice Despite South African firms having huge resources, literature has not overtly mentioned the nonmarket capabilities that such EMNEs build when localising their businesses to suit local market conditions. Businesses utilising the ownership model combat the liability of foreignness by acquiring a local business with ethical leadership, whilst companies using the partnership model find partners with similar values. This research contributes to the existing body of knowledge on practical internationalisation strategies into developing markets with high psychic distance. Although it is an exploratory study, it clarifies the strategic considerations that EMNEs contemplate during planning, as well as when assessing their entry strategies, implementing and integrating their resources, and in rare cases, how they exit such markets. Limitations of the study Like most empirical studies that are exploratory in nature, there are limitations to the conclusions that can be drawn, which constrain the generalisability of this study: • The study was heavily weighted to certain industry sectors - primarily financial services - which have a presence in other African countries. The obvious question is to what extent its findings are relevant to other industries? • For the two cases, the knowledge of the participants regarding how their organisations plan and implement their strategies could have been diverse, but the information was limited to those interviewed. • The volatility of African markets is very high, so between the time of embarking on the research and consolidating the results and findings, some institutional context could have changed, such as the impact of the weakening of the resources sector on Nigeria and Angola. Suggestions for future research • The case studies were restricted to financial services, thus a study of more industry sectors using additional case studies would be valuable to extend the results of this research effort. • Hoskisson, Eden, Lau & Wright (2000) argued that the process "emerging economies" takes place over a long time and multinationals' experimentation and learning is likely to be imperfect. Further research is thus needed to generate conclusive longitudinal empirical evidence theory in this area. • The growing Chinese FDI in Africa is often driven by the Chinese government's "Going Out" policy, which was established to support firms as they internationalise. Although South Africa has a "Trade Invest Africa" policy, companies in the study were oblivious to this government support. It is not clear whether South African companies have an advantage on the continent and how competition from Chinese companies, being embraced by African governments, impact South African MNEs' internationalisation strategies into the rest of Africa.
First in a series, which aims to analyze the recent economic and financial situation in Côte d'Ivoire, this report analyzes the main macroeconomic developments and structural policies of the country from 2013 until mid-2014. It also reflects on the underlying factors of the strong economic recovery in Côte d'Ivoire since the end of the post-election crisis, to assess the likelihood of sustained economic growth and significant poverty reduction in the country. Finally, the report analyzes the effects of declining oil prices and the appreciation of the dollar against the euro and the CFA franc on the Ivorian economy. This edition does not examine the impact of strong economic growth on the Ivoirian population's well-being indicators such as, poverty, employment and inequality. Within the scope of this report, the objective is to understand the factors contributing to the strong economic recovery in Côte d'Ivoire. This economic update is targeted toward a larger audience, in order to stimulate constructive debate on public policy in the country and between the country and its development partners.
This note provides guidance on how to use social accountability (SA) approaches in oil, gas, and mining projects, with particular emphasis on World Bank projects in the extractive industry (EI) sectors. It highlights some consequences of poor transparency and accountability in EI sectors and identifies opportunities for addressing these issues. It demonstrates how the use of SA approaches and tools can improve the implementation and outcomes of EI projects. Although the note is written primarily for a World Bank/International Finance Corporation (IFC) audience and project cycle, it is hoped that it will be a resource for government, industry, and civil society partners as well.
This paper is intended to provide a brief overview of the different SEZ experiences in China and Africa, the key lessons that Africa can learn from China, as well as the recent Chinese zones in Africa. For this purpose, the paper is structured in the following way: section 1 starts with definition of SEZs, then followed with the Chinese experiences (section 2), African experiences (section 3), the lessons that Africa can learn from China (section 4), Chinese zones in Africa (section 5), and then concludes.
Effective January 1, 2015, Indonesia's new government took the decisive step of implementing a new fuel pricing system, dramatically reducing gasoline and diesel subsidy costs. This paved the way for the government's first budget, passed in February, to shift spending towards development priorities, especially infrastructure, the allocation for which is double the 2014 outturn. Successful implementation of the bold vision of the budget, however, will require overcoming administrative constraints to spending and dramatically lifting revenue collection performance. Achieving this, and having the benefits flow through into faster economic growth and poverty reduction, is likely to take time, especially with the pace of sustainable economic growth having slowed, due partly to lower commodity prices. Beyond the fiscal sector, reforms taken in the first months of the government's term in key areas such as investment licensing also face complex challenges to make operational. The government has signaled its strong reform intentions, and raised expectations. Early progress will now need to be consolidated by effectively implementing major reforms and the budget posture, against a still-challenging global economic backdrop for Indonesia.
Entidades financieras canadienses desempeñaron un papel importante en el desarrollo de los mercados financieros de las principales ciudades colombianas. Aseguradoras tales como Manufacturers Life insurance Company y Life Assurance Company of Canada tuvieron un gran impacto en el desarrollo del negocio de seguros en la costa Atlántica, mientras que Royal Bank of Canada contribuyó al desarrollo de la banca personal. Este artículo se centra en las experiencias de entidades financieras canadienses en Colombia desde finales del siglo XIX hasta el comienzo de la Segunda Guerra Mundial. Resalta la naturaleza competitiva del negocio financiero internacional y el papel que cumplieron los líderes empresariales, las políticas públicas y los gobiernos en su lucha por el posicionamiento en los mercados emergentes de países como Colombia. Esta investigación histórica también contribuye a un mejor entendimiento de las relaciones bilaterales entre Colombia y Canadá y la forma como el capitalismo se extendió en el hemisferio occidental. ; Canadian financial institutions played an important role in the development of financial markets within Colombia´s urban centers. Specifically, insurance companies such as Manufacturers Life Insurance Company and Life Assurance Company of Canada were crucial in the expansion of the insurance business across the Caribbean coast, while Royal Bank of Canada contributed to the development of personal banking operations throughout the nation. This paper looks at the experience of Canadian financial companies in Colombia from the late 1800s to the beginning of World War II. It highlights the competitive nature of international financial business and the role of business leaders, policy, and governments in efforts to secure market shares in emerging nations such as Colombia. This historical research also contributes to a better understanding of the bilateral relations between Colombia and Canada, and the ways in which capitalism expanded across the western hemisphere.
Chinese Foreign Direct Investment (FDI) into Africa is on the rise and Ethiopia is at the forefront of this trend. On request of the Government, the World Bank surveyed 69 Chinese enterprises doing business in Ethiopia with a 95-question survey in May/June 2012. The survey covered various aspects of the foreign direct investment climate in Ethiopia, including infrastructure, sales and supplies, land, crime, competition, finance, human resources, and questions about general opportunities and constraints for doing business in Ethiopia. This report summarizes the results of survey and provides policy suggestions in light of the analysis; the report also provides some broader background of the expected benefits of FDI into Ethiopia as well as current policies and approaches to promote incoming investment. Addressing identified obstacles could help Ethiopia to take better advantage of foreign investors in order to accelerate the shift from a predominantly low-productivity agriculture-based economy towards a higher-productivity manufacturing and export-based economy. Experiences in successful countries around the world, and especially East Asia show that foreign investment is instrumental to facilitate such a structural transformation and to maintain sustained and broad-based economic development. This study recommends five main areas for policy adjustments to facilitate foreign investors coming into Ethiopia: adjust customs clearance procedures and trade regulations; facilitate currency convertibility and increase transparency of the exchange rate policy; improve tax administration consistency and efficacy; execute impartial labor regulation; and increase the supply and quality of skilled workers.
The lessons learned from the implications of the global crisis for the Armenian economy led the Government of Armenia to refine its approach to economic development policy. The business environment, the market structure, and the incentive pattern had not fostered reallocation of resources into more productive areas or the emergence of internationally competitive products and services. Despite numerous initiatives and multiple efforts, there was no holistic approach or actionable roadmap for supporting private sector development. The pressing need to restore economic growth despite a small domestic market led the Armenian government to search for new sources of growth in export-oriented industries. At the end of 2011, the Government of Armenia adopted its export-led industrial development strategy. The strategy set as targets improving the general business environment and sector-specific initiatives to address market failures and expand exports. The strategy builds on both a general (crosscutting) and an industry-customized toolset.