Overview of the Book. May May 2011

Transcription

1 Overview of the Book May 2011 May 2011 V. Bruce J. Tolentino, Ph.D. Chief Economist and Director of Economic Reform and Development Programs The Asia Foundation, San Francisco

2 Outline 2 Overview: The Asia Foundation s Economic Reform and Development programs; Economic Governance Index (EGI); Public Private Dialogue (PPD); The Asia Foundation s implementation of political economy approaches to reform.

3 The Asia Foundation - 1 Non-profit, private, international development organization in operation since 1954; Promotes peaceful, prosperous, just and open Asia-Pacific region; 19 offices across Asia, Washington D.C., and San Francisco HQ; 3

4 The Asia Foundation - 2 About 800 staff worldwide, mostly national; Annual operating budget = U.S.$150 million; Private + public donors: Australia, Belgium, Canada, Denmark, E.U., Korea, Netherlands, Norway, U.K., and U.S. 4

5 TAF Core Program Areas Economic reform and development (ERD), Governance, law and civil society, Women s empowerment, Environment, International Relations, and Books for Asia 5

6 TAF ERD Focus: Economic Governance 6 Improve policy environment for private investment and enterprise, particularly SMEs; Strengthen effective economic governance institutions; Reduce unnecessary regulations and interventions, and Foster multi-sectoral, multi-level reform partnerships for reform.

7 Key TAF ERD Tools Research and surveys Economic Governance Index (EGI) Public-Private Dialogue for Reform Regulatory Impact Assessment One-Stop Shops Strengthened Local Fiscal Management 7

8 8 Key TAF ERD Tools Economic Governance Index to measure, set up agenda for reform; Public-Private Dialogue to harness coalitions for reform; Regulatory Impact Assessment to analyze and act; One-Stop Shops to demonstrate gains from reforms; Strengthened Local Fiscal Management to help implement governance reforms.

9 Innovations in Strengthening Local Economic Governance in Asia - 1 Reports on direct experience in Asia: Bangladesh, Cambodia, Indonesia, Philippines, Sri Lanka, Vietnam; Emphasis on empirical basis for program design, enriched through learning by doing ; 9

10 10 Innovations in Strengthening Local Economic Governance in Asia - 2 Medium to long-term impact enabled by stitching short-run projects together into continuing engagement, and Continuing engagement facilitates programming cognizant of political economy dynamics in country context.

11 The Economic Governance Index Nina Merchant-Vega Assistant Director, Economic Reform and Development The Asia Foundation May 18,

12 Economic Governance Index Economic Governance Indexes (EGI) are country-specific indexes for measuring the quality of Economic Governance across sub-national units (provinces, districts, etc.) 2

13 Typical EGI Sub-Indices 1. Entry Costs 2. Access to Land and Security of Tenure 3. Transparency 4. Time Costs of Regulatory Compliance 5. Informal Charges 6. Participation 7. Law and Order 8. Tax Administration 9. Dispute Resolution 10. Local Infrastructure 3

14 EGI History Vietnam: Provincial Competitiveness Index, (continues under a different project) Cambodia: Provincial Business Environment Scorecard, Indonesia: Cities and Regencies Index, * Sri Lanka: Economic Governance Index, 2007 Bangladesh: Economic Governance Index, 2010 *Methodological changes introduced in 2007 Malaysia: Business Environment Index,

15 What is the Purpose of EGI Research? Donors & NGOS Local Government Analysis Development Research Economic Governance Index: Support and Inform Reform Processes National Government Analysis Business Community Monitoring 5

16 Overview of EGI Methodology Collection Construction Calibration Indicator Indicator Indicator Indicator Indicator Indicator Indicators include both firm survey perceptions and hard data from published sources Sub-Index 1 Sub-Index 2 W W W Weights EGI Indicator Indicator Indicator Sub-Index 10 6

17 2010 Bangladesh Final Composite Index FARIDPUR DINAJPUR KUSHTIA SYLHET COX'S BAZAR MYMENSINGH COMILLA RANGPUR PATUAKHALI DHAKA JESSORE KHULNA BOGRA PABNA NOAKHALI TANGAIL CHITTAGONG BARISAL RAJSHAHI Entry Costs Land Access & Security of Tenure Transparency Time Costs of Regulatory Compliance Informal Charges Participation Law & Order Tax Administration Dispute Resolution Infrastructure

18 Rankings and Tiers: Vietnam

19 Vietnam Provincial Competitiveness Index

20 How The EGI has Influenced Policy In all countries, widespread media coverage highlighting local business environment issues. Provincial Diagnostic in An Giang In Vietnam, Indonesia and Cambodia have adopted the EGIs as instruments to monitor progress at the provincial levels. Provincial governments in Cambodia and Vietnam countries have asked for customized diagnostic analyses of their performance. In Bangladesh the Commerce Minister outlined a series of reforms based on the EGI, including license issuance standards and access to information standards. In Sri Lanka, authorities used it as a tool to identify priority areas for action and policy advocacy at the local levels. 10

21 EGI and Development Outcomes EGI and Development Outcomes: Vietnam EGI, 2007: Using regression analysis to control for initial conditions notably infrastructure, human capital, and proximity from major markets a one point improvement in the unweighted index for the average province is associated with a 1% increase in GDP per capita. EGI and Firm Outcomes: Cambodia, 2009: Using regression analysis to control for firm level factors, a 10- point increase in the EGI would result in a 9.9% increase in the likelihood that an entrepreneur will expand her business. Bangladesh, 2010: The same analysis in Bangladesh shows that a 10-point increase in the EGI would result in 6% increase in the likelihood that an entrepreneur will expand her business. 11

22 Thank You Nina Merchant-Vega 12

23 EGI and Development Outcomes: Provincial Wealth and GDP Growth 13

24 EGI and Firm-Level Outcomes: Decision to Expand 14

25 EGI Methodological Goals 1. To present the aggregate voice of the MSMEs. Representative sample, avoids selection bias 2. To Measure Economic Governance, not Development. Allows comparison of districts units on an equal basis 3. To Measure Districts against Best-Governance Practices in the country. Not an idealized, and perhaps unattainable notion of good-governance 4. To Present Actionable Policy Information to Central and Local Government Leaders 15

26 Complimentarity with Doing Business The Asia Foundation: Economic Governance Index (EGI) World Bank International Doing Business Index (DBI International) World Bank Subnational Doing Business Index (DBI Subnational) 1. Scope Country-specific rankings of Sub-national units (Provinces, States, Districts, etc.) of Asian countries International rankings of countries. Rankings of subnational units (Provinces, States, Districts etc.), generally using the same methodology of the International Doing Business rankings. 2. Focus Focus on economic governance; holds structural factors and natural endowments such as infrastructure and human capital constant to focus on what is under the control of the local government. Relatively narrow focus on business licensing and permits, and the requirements of laws and regulations as written; does not assess implementation of laws and regulations. Relatively narrow focus on business licensing and permits, and the requirements of laws and regulations as written; does not assess implementation of laws and regulations. 3. Comparison across Jurisdictions Subnational units are compared to each other within countries. Data is scaled against best performers/ best practices within countries. International comparison of all countries, regardless of development status. Subnational units are compared with each other within countries and also with other countries, regardless of development status. 16

27 The Asia Foundation: Economic Governance Index (EGI) World Bank International Doing Business Index (DBI International) World Bank Subnational Doing Business Index (DBI Subnational) 4. Annual Comparison Annually comparable within countries. Data is adjusted to be comparable, but frequent changes in methodology make annual rankings less meaningful across countries. Depends on changes in methodology within country. 5. Data Sources Business perceptions data through a firm-level survey, hard data from published sources and data from expert informants. Expert informant survey. Expert informant survey. 6. Survey Respondents Firms including small and mediumscale enterprises, some in the informal sector. Expert informants, generally lawyers, accountants and consultants. Expert informants, generally lawyers, accountants and consultants. 7. Number of Sub-Indices/ Elements Usually 10 specific sub-indices selected according to country conditions, for example: Transparency, Security, Entry Costs and Pro-Activity of Sub-National Leadership. Each of the indices is comprised of indicators which are scaled to reflect best practices in that country. Ten (10) fixed elements. Examples include Starting a Business, Dealing with Licenses and Registering Property. Number of sub-indices varies depending on policy space of the subnational units. However, chosen topics always mirror the international Doing Business fixed elements. 8. Composite Methodology Overall index weighted using weighting regressions. Each of the ten elements is weighted equally. Sub-national units may or may not be aggregated into an equally-weighted index. 17

28 Survey Instrument Example Questions 18

29 EGI Survey: Sampling All EGIs use Stratified Random Sampling Divide the population into groups (strata) that differ in important ways. Random selection minimizes selection bias. Stratification overcomes normal sampling variation. Population Distribution of Phnom Penh # of Employees/ Establishment Type Total % 1 to 5 % 6 to 10 % 11 to 20 % 21 to 30 % 31+ % Services + Others 3,151 53% % % % 77 74% 65 57% Manufacturing, Construction, & Natural Resources % % % 33 9% 9 9% 23 20% Commerce 1,973 33% % % 61 17% 18 17% 27 23% Sample Distribution of Phnom Penh # of Employees /Establishment Type Total % 1 to 5 % 6 to 10 % 11 to 20 % 21 to 30 % 31+ % Services + Others 45 53% 31 48% 8 61% 4 74% 1 74% 1 57% Manufacturing, Construction, & Natural Resources 13 15% 10 15% 2 13% 1 9% 0 9% 0 20% Commerce 32 33% 25 36% 5 26% 1 17% 0 17% 1 23% 19

30 Cambodia 2006 Population & Sample Distribution Population by Sector Sample by Sector Commerce 23% Services and Others 57% Commerce 23% Services and Others 57% Manufacturing & Construction 20% Manufacturing & Construction 20% 20

31 Survey Implementation : Data Collection Methods!"#$%&%'%() *+"#,-. /-.0%& ,5- Indonesia!"#$%"&'()*'+*!(,#-*.#$+'$/#, ** 3#%$*!(&"&%"#, (&"*'+*9(%:;)&).$'<&(=#.$'<&(=# >?(&=&@%:A*8$B%(* District 8(&")*C'<#$#,* 60A60 24A1D 0EA0EF 266/471 G?$<#;*H&)"$&B?"&'( >%&:IJ?" K%=#I"'IK%=# K%=#I"'IK%=# Face-to-Face G%/@:#*G&L# M6 12,000 G"$%"% N#O%:*K'$/P*G#="'$P*9O# G#="'$P*G&L# G#="'$P*G&L# Sector, Size Q'"%:*R#)@'()#*R%"# 12S 05S 54S TBA R%(,'/&L#,*R#@:%=#/#("*'+*T'(IR#)@'(,#(") T' 3#) 3#) 3#) U%$,*H%"%*V/@:';#, 3#) 3#) 3#) 3#) T?/B#$*'+*G?BI!(,&=#) W#&OX"&(O*'+*G?BI!(,&=#) 3#) T' T' TBA F*T'$"X#$(*%(,*V%)"#$(*.$'<&(=#)*Y#$#*#-=:?,#,*,?#*"'*=&<&:*?($#)"Z ** Index previously performed with different methodology ( ) TBA: Survey still in progress 21

32 Construction: Bangladesh Sub-Index Dimensions Sub-Index 2: Land Access and Security of Tenure Dimension 1: Access to Land Dimension 2: Security of Tenure Indicator 1: % of firms with a registered Dalil (land title) Indicator 2: % of firms saying it was difficult/very difficult to register Dalil Indicator 3: % of firms rating expropriation risk high or very high Indicator 4: % of firms that deem rental contract changes a risk 22

33 Construction: Indicator Selection Criteria for Indicator Selection: Theoretically important in country context Indicators not primarily driven by firm-level factors like size or sector Small standard errors around district scores 23

34 Construction: Indicator Diagnostics Confidence Intervals around Means for Fee for Trade License Provinces Ranked by Mean Score 95 % Confidence Interval Mean Value Question H7_3: Officials are creative about working within the national law to solve the problems of private sector firms. 24

35 Construction: Final Sub-Indices 2010 Entry Costs Sub-Index PATUAKHALI BARISAL DINAJPUR JESSORE FARIDPUR SYLHET KHULNA CHITTAGONG RANGPUR COX'S BAZAR COMILLA KUSHTIA NOAKHALI TANGAIL PABNA MYMENSINGH RAJSHAHI BOGRA DHAKA Dimension 1: Time Costs Dimension 2: Monetary Costs

36 Construction: Normalization Once finalized, all indicators are normalized to a 10- point scale Allows scaling to best practices in country Allows data in different units to be combined Allows for comparison across years 26

37 Construction: Sub-Index Construction Firm Perceptions (60%) Hard Data (40%) Firm Perceptions Wait for Trade License (Median Days) Wait for TIN (Median Days) Wait for VAT (Median Days) Fully Formal Firms in District (%) Fee for Trade License (Median Fee) Fee for TIN (Median Fee) Fee for VAT (Median Fee) Normalize Indicators Dimension 1: Time Costs Dimension 2: Monetary Costs 50% Entry Costs 50% 27 27

38 Calibration: Composite Index Weights Decision to weight sub-indices to in final composite index reflect their impact on private sector development. Some sub-indices are more important than others in explaining cross-district performance Sub-Index Informal Charges Law and Order Transparency Marginal Probability of Business Expansion (Based on 1-Point Increase in Sub-Index) 4.06%*** 3.41%*** 2.81%*** Potential Impact Very High Very High High Final Weight 15% 15% 12.5% Weighting Methodology Regression analysis Factor Analysis Average opinion of firms on biggest constraints. Time Costs Dispute Resolution Infrastructure Land Access And Tenure Entry Costs 1.98%*** 1.33%* 1.26%* 0.28% -0.16% High Med Med Med Low 12.5% 10.5% 10.5% 10.5% 5.5% Tax Administration -1.1%* Low 5.5% Participation -2.2%*** Very Low 2.5% 28

39 Public Private Dialogues Building coalitions for economic governance and private sector development - May 2011 Véronique Salze-Lozac h, Regional Director for Economic Programs 1

40 OBJECTIVE in promoting Local Public-Private Dialogue Improve the business environment that too often constraints the competitiveness of MSMEs at the local level 2 2

41 Local Public Private Dialogue (LPPD) a mechanism to address issues that can hinder private sector development or income generating activities The Asia Foundation s approach focuses at the sub-national or local level (complementarily with National level) Experience based on a variety of programs: in Indonesia, the Philippines, Cambodia, Sri Lanka, Bangladesh, more recently in Nepal, Timor Leste, India Developed tools to (1) analyze the needs for reform (2) document the constraints and measure progress (3) strengthen the PPD process for increased effectiveness and impact 3 3

42 A MULTI-STAKEHOLDER APPROACH Local Governments Collaboration Dialogue and Action for Reform Accountability National Governments Business Community Civil Society Transparency 4

43 A process to design and implement reforms Structured dialogue Workable reforms Reforms that work Diagnostic Solution Design Implementation Monitoring & Evaluation Engagement Consensus building Ongoing support Watchdog Definition Filtering Watchdog Feedback loop Empowerment Resources PPD contributes to all steps of reform process A RESULT DRIVEN PROCESS 5 5

44 he Asia Foundation s integrated approach to LPPD Reliable information Inclusive and effective processes (including sensitivity to gender, minorities, informal sector, etc.) Ownership and capacity of stakeholders Tangible and measurable results 6

45 1. ASSESSING BUSINESS ENVIRONMENTS SUPPORTING TOOLS Economic Governance Index 2. DOCUMENTING ISSUES Quick assessment / survey of the issue Regulation mainstreaming etc. Regulatory Impact assessment (RIA) Diagnostics Policy research Business Barometers Best Practices Identification Ongoing Public-Private Dialogues at Local Level 3. STRENGTHENING LPPDs and MEASURING PROGRESS Trainings Networking activities Media and Communication tools M&E system Issue Tracker Online Database (being development) 7

46 Networking Horizontal and Vertical Linkages Government Private Sector Forum PPPD PPPD PPPD PPPD PPD PPD PPD PPD PPD PPD PPD PPD PPD PPD PPD PPD 8

47 Example of results In Cambodia: - Environment Tax reduced then removed in 3 provinces - Licensing Boards developed and posted in 7 provinces - Agreements signed between fishing communities and public sector on fishing areas by more than 40 communities In Sri Lanka: - Public-Private Partnerships on Solid Waste Management - Streamlining of regulations: Taxes, licenses, etc. In Bangladesh: - Time to obtain Trade License reduced from a weeks to 1 day in Sylhet (70 % - 80 % increase in new trade license issuance and increased income for city corporation) - Women Business Fora created in 9 districts and access to credit facilitated for women 9

48 THANK YOU

49 11

50 Part 2: The Asia Foundation s Implementation of Political Economy Approaches to Reform May 2011 May 2011

51 TAF s implementation of a political economy approach - 1 Policy reform is always political; Emerging from direct field experience; Approach is institutionally challenging, lots of moving parts - not under direct control, may be risky and messy; 13

52 TAF s implementation of a political economy approach - 2 Conservative adoption, patient construction toward methodology; Advances at local level are leveraged into national level voice and influence. 14

53 TAF s political economy approach: key elements Focus and sustained attention, Thorough analysis and metrics, Flexibility and timing, Communications, Mobilization of reform champions and coalitions, and Implementation assistance. 15

54 Mapping the Reform Arena: Transport Sector Reform - Philippines High Level of Influence Low Monopoly carrier Anti Regulator President Mayor Exporters Migrant Workers Reform REFORM! Activities and Outputs Analytics Public Private Dialogue Customized Presentations Statements/Letters Policy instruments Hotel Association Pro 16

55 TAF s political economy approach: Key reform dynamics Development entrepreneurs in local partner organizations, who: Take point in work toward desired reforms; Provide technically-correct, politicallyfeasible, context-specific assistance to reform partners. 2. Elites and leaders who invest their political capital on reforms; 17

56 TAF s political economy approach: Key reform dynamics Reform partners able to quickly adapt to emerging opportunities, and 4.Donors who provide flexible grants/ contracts and accommodate changes in activities and outputs as context and situations evolve. 18

57 A project structure amenable to TAF s political economy approach ODA Donors Grants The Asia Foundation Project design/ grant mgmt Reform Coalition Government Partner Development Entrepreneurs in local organizations Other Government Partners Private Sector Partners Other Partners Donors Provide grants for flexible, outcome-oriented implementation. The Asia Foundation Identify and manage development entrepreneurs and subgrants. Local Organization Platform to build reform coalition across various partners. 19

58 The book is available for FREE download from: 20