91466 FLAGSHIP SEMINARS RECOMMENDED READING FLAGSHIP SEMINARS RECOMMENDED READING ii  Flagship Seminars | RECOMMENDED READING TABLE OF CONTENTS Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv Acknowledgements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . v A Reform Agenda for Europe’s Leaders . . . . . . . . . . . . . . . . . . 1 Cities and Citizens: Challenges for Inclusive Development . . . . . . . . . 5 CNN Debate on the Global Economy . . . . . . . . . . . . . . . . . . 10 Ethics and Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Financing Asia’s New Growth Models . . . . . . . . . . . . . . . . . . 19 Financing Development Post-2015: Towards a Shared Vision . . . . . . 23 Food For the Future: Achieving Food Security in the Face of Climate Change . . . . . . . . . . . . . . . . . . . . . . 25 Growth and Reform Challenges . . . . . . . . . . . . . . . . . . . . . 30 Making Extractive Industries’ Wealth Work for the Poor . . . . . . . . . 35 Public Debt, Public Investment, and Growth . . . . . . . . . . . . . . . 40 Transforming World Trade: Global Value Chains and Development . . . 44 iii  Flagship Seminars | RECOMMENDED READING INTRODUCTION R ecommended Reading supports the open dialogue of the Annual Meetings Seminars by highlighting publicly available resources relevant to each discussion. Compiled from a variety of bibliographic sources, the resources selected have been determined to meet the Library Network’s standards for quality, relevance, and accuracy. When possible, full text links are provided to encourage electronic access, regardless of location. It is our hope that the publications featured in this issue of Recommended Reading encourage knowledge exchange among development experts during the Annual Meetings and into the future. The Library Network of the International Monetary Fund and World Bank Group contributes to the Annual Meetings 2014 Flagship Seminars by presenting the very best of world research on key topics of development and international economics. Sharing this knowledge with experts mobilizes our resources on behalf of the world’s poor. We encourage you to share this publication with others working in the field of international development, students, concerned citizens, or others striving to build shared prosperity in a stable world economy. The Library Network of the World Bank Group and IMF Washington, DC October 2014 iv  Flagship Seminars | RECOMMENDED READING ACKNOWLEDGEMENTS R ecommended Reading was prepared by the staff of the Library Network of the International Monetary Fund (IMF) and World Bank Group (WBG) with contributions from IMF departments and WBG units that sponsored the seminars and suggested research for this compilation. Special thanks go to the staffs of the IMF and WBG who were generous with their knowledge, expertise, and time. © International Monetary Fund ©The World Bank Group v  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar A REFORM AGENDA FOR EUROPE’S LEADERS Sponsored by the IMF’s European Department E urope’s new leaders are taking the policymaking reins as the acute phase of the euro area crisis is subsiding, but with serious challenges remaining and many voters having signaled their discontent. Despite improving economic prospects, the obstacles to strong and sustained growth remain significant, unemployment is stubbornly high, reform fatigue is setting in, and financial market fragmentation persists. The seminar will bring together a set of panelists from the public and private sectors and academia to discuss the merits of further economic and financial integration following European elections: whether more integration is necessary and feasible to ensure the long-term viability of the euro area; what types of integration are likely to command support and whether this would be sufficient to generate enough growth to reduce very high unemployment; and whether partial integration is a sustainable outcome. 1  Flagship Seminars | RECOMMENDED READING A Reform Agenda for Europe’s Leaders Al-Eyd, Ali, and S. Pelin Berkmen. 2013. el shocks, whether exogenous or homegrown, to spread across the euro area. This paper explores the role that “Fragmentation and Monetary Policy in the Euro deeper fiscal integration can play in correcting archi- Area.” Working Paper 13/208, International Mone- tectural weaknesses in the system, thereby reducing tary Fund, Washington. the incidence and severity of future crises. The paper The European Central Bank has taken a range of argues for a clearer ex ante approach to fiscal discipline actions to address bank funding problems, eliminate and transfers to further strengthen the architecture of excessive risk in sovereign markets, and safeguard EMU, ensuring the stability of the euro area. monetary transmission. But euro area financial markets ■■ http://www.elibrary.imf.org/view/IMF006/20673- have remained fragmented, driving retail interest rates 9781484307373/20673-9781484307373/20673- in stressed markets far above those in the core. This has 9781484307373.xml?rskey=ABlBb2&result=1 impeded the flow of credit and undermined the trans- mission of monetary policy. Analysis presented in this paper indicates that the credit channel of monetary Bluedorn, John, and Shengzu Wang. 2014. policy has broken down during the crisis, particularly “Euro Area: An Unbalanced Rebalancing?” iMFdi- in stressed markets, and that small and medium-sized rect (blog), July 22. enterprises in these economies appear to be most affected by elevated lending rates. The unbalanced current account trade balances within Europe are discussed. Creditor nations continue with ■■ http://www.elibrary.imf.org/view/IMF001/20843- large surpluses, even though debtor nations are moving 9781484328750/20843-9781484328750/20843- toward surpluses themselves. 9781484328750.xml?rskey=sgs7C3&result=1 ■■ http://blog-imfdirect.imf.org/2014/07/22/euro-ar- ea-an-unbalanced-rebalancing/ Al-Eyd, Ali, Angana Banerji, Bergljot Bark- bu, Pelin Berkmen, John Bluedorn, An- dreas Jobst, Huidan Lin, and others. 2014. Bordo, Michael D., Lars Jonung, and Agnieszka Markiewicz. 2013. “Euro Area Policies: 2014 Article IV Consultation Selected Issues.” Country Report 14/199, Interna- “A Fiscal Union for the Euro: Some Lessons from tional Monetary Fund, Washington. History.” CESifo Economic Studies 59 (3): 449–88. This Selected Issues report covers five topics: Youth The recent financial crisis (2007–09) is the longest and Unemployment in Europe: Okun’s Law and Beyond; the deepest recession since the Great Depression of Investment in the Euro Area: Why Has It Been 1930. The crisis that originated in the U.S. subprime Weak?; Capital Market Development: SME Financing mortgage markets spread and amplified through inter- in the Euro Area; External Rebalancing in the Euro national financial markets and resulted in severe debt Area: Development and Policies; and Fiscal Gover- crises in several European countries. Events revealed nance in the Euro Area: Progress and Challenges. that the European Union had insufficient means to halt the spiral of the European debt crisis. The aim of ■■ http://www.elibrary.imf.org/view/IMF002/21481- this study is to identify the characteristics of a robust 9781498308007/21481-9781498308007/21481- common fiscal policy framework that could have alle- 9781498308007.xml viated the consequences of the recent crisis. ■■ http://cesifo.oxfordjournals.org/content/59/3/449. Allard, Céline, Petya Koeva Brooks, John full.pdf+html C. Bluedorn, Fabian Bornhorst, Katharine Christopherson, Franziska Ohnsorge, Tigran Poghosyan, and an IMF Staff Team. Eichengreen, Barry. 2010. 2013. “Imbalances in the Euro Area.” Unpublished, Uni- “Toward a Fiscal Union for the Euro Area.” Staff versity of Berkley, Berkley, CA. Discussion Note 13/09, International Monetary Fund, Washington. ■■ http://eml.berkeley.edu/~eichengr/Imbalanc- es_Euro_Area_5-23-11.pdf The crisis exposed a critical gap in Economic and Monetary Union (EMU): the capacity for country-lev- 2  Flagship Seminars | RECOMMENDED READING A Reform Agenda for Europe’s Leaders Enderlein, Henrik, Jacques Delors, Helmut The euro area periphery countries and the Baltic coun- Schmidt, Peter Bofinger, Laurence Boone, tries, which had large current account deficits in the Paul De Grauwe, Jean-Claude Piris, and run-up to the crisis, needed adjustment of relative pric- others. 2012. es to achieve both internal and external balances. Thus far, tangible progress has been made through lower “Completing the Euro: A Roadmap towards Fiscal wages and/or higher productivity relative to trading Union in Europe.” Studies & Reports 92, Notre partners (“internal devaluation”), which contributed to Europe - Jacques Delors Institute, Paris. narrowing current account deficits and shifting output This report is the result of the work of the “Tommaso toward the tradables sector. Some early adjusters cut Padoa-Schioppa group,” to reflect on the future of wages more rapidly followed by productivity improve- the Economic and Monetary Union (EMU). After a ment, but others have only slowly improved productiv- thorough analysis of the roots of the crisis, the report ity, largely through labor shedding. identifies three major challenges the euro area will ■■ http://www.elibrary.imf.org/view/IMF001/21512- have to solve in the coming decade: preventing large 9781498364713/21512-9781498364713/21512- and persistent EMU heterogeneities; making the 9781498364713.xml?rskey=Q5oKUc&result=1 EMU fiscal framework more sustainable and resilient to “self-fulfilling solvency” crises; and breaking the nexus between national banks and national sovereigns Moghadam, Reza. 2014. with the establishment of an appropriate EMU frame- “Europe’s Road to Integration.” Finance & work for banking supervision and resolution. Development 51 (1): 8–13. ■■ http://www.eng.notre-europe.eu/011-3317-Com- ■■ http://www.imf.org/external/pubs/ft/ pleting-the-EuroA-road-maptowards-fiscal- fandd/2014/03/moghadam.htm union-in-Europe.html Moghadam, Reza. 2014. Goyal, Rishi, Petya Koeva Brooks, Mah- mood Pradhan, Thierry Tressel, Giovanni “Sustaining the Recovery: Strategies and Policies Dell’Ariccia, Ross Leckow, Ceyla Pazarba- for Growth and Stability.” Speech prepared for the sioglu, and an IMF Staff Team. 2013. Brussels Economic Forum, Brussels, June 10. “A Banking Union for the Euro Area.” Staff Dis- ■■ http://www.imf.org/external/np/speech- cussion Note 13/01, International Monetary Fund, es/2014/061014.htm Washington. “More Fiscal Integration to Boost Euro A case is made for the design of a banking union for Area Resilience.” 2013. the euro area. The paper discusses the benefits and costs of a banking union, presents a steady-state view IMF Survey, September 25. of the banking union, elaborates difficult transition Deeper fiscal integration in the euro area can correct issues, and briefly discusses broader European Union weaknesses in the system’s architecture, make the area issues. It is accompanied by three background technical more resilient to future crises, and provide long-term notes that analyze the various elements of the bank- credibility to crisis-response measures already adopted. ing union: a single supervisory framework, a single resolution and a common safety net, and urgent issues ■■ http://www.imf.org/external/pubs/ft/survey/ related to direct European Stability Mechanism recap- so/2013/car092513a.htm italization and repair of weak banks in Europe. ■■ http://www.elibrary.imf.org/view/IMF006/20274- Pisani-Ferry, Jean, André Sapir, Nicolas 9781475521160/20274-9781475521160/20274- Véron, and Guntram B. Wolff. 2012. 9781475521160.xml?rskey=R9ySIz&result=1 “What Kind of European Banking Union?” Bruegel Policy Contribution Issue 2012/12, Kang, Joong Shik, and Jay C. Shambaugh. Bruegel, Brussels. 2014. This paper discusses the creation of a European “Progress Towards External Adjustment in the Euro banking union. First, it discusses questions of design. Area Periphery and the Baltics.” Working Paper It then highlights seven fundamental choices that 14/131, International Monetary Fund, Washington. decision makers will need to make: Which European 3  Flagship Seminars | RECOMMENDED READING A Reform Agenda for Europe’s Leaders Union countries should participate in the banking exports have typically rebounded, subdued demand union? To which categories of banks should it apply? accounts for much of the reduction in current account Which institution should be tasked with supervi- deficits. Hence, the current account balance of the euro sion? Which one should deal with resolution? How area as a whole has shifted into surplus. centralized should the deposit insurance system be? ■■ http://www.elibrary.imf.org/view/IMF006/21467- What kind of fiscal backing would be required? What 9781498373814/21467-9781498373814/21467- governance framework and political institutions would 9781498373814.xml be needed? ■■ http://www.bruegel.org/download/parent/731- Tressel, Thierry, and Shengzu Wang. 2014. what-kind-of-european-banking-union/file/1595- what-kind-of-european-banking-union/ “Rebalancing in the Euro Area and Cyclicality of Current Account Adjustments.” Working Paper 14/130, International Monetary Fund, Washington. Schindler, Martin, Helge Berger, Bas B. Bakker, and Antonio Spilimbergo, eds. The paper examines progress with the external rebal- 2014. ancing of euro area deficit countries. Relative prices Jobs and Growth: Supporting the European Recovery. are adjusting at different paces across countries and Washington: International Monetary Fund. with different compositions of wage cuts and labor shedding. There is so far limited evidence of resource Five years after the onset of the global financial crisis, reallocation from nontradable to tradable sectors, while Europe’s economy is still fragile. Notwithstanding improved export performance is still dependent on recent positive signs amid calmer financial markets, external demand from the rest of the world. Current medium-term growth is likely to remain frail owing account adjustments have taken place, reflecting struc- to continuing weaknesses and vulnerabilities at the tural changes but also cyclical forces, suggesting that country level and in the fabric of European institutions part of the improvements may unwind when cyclical and banks, especially in the euro area. In addition, conditions improve. unemployment in many countries has reached very ■■ http://www.elibrary.imf.org/view/IMF001/21508- high levels. The IMF research collected in this volume 9781498334426/21508-9781498334426/21508- provides a number of guideposts that offer an oppor- 9781498334426.xml?rskey=ozAm9G&result=1 tunity for stronger and better-balanced growth and employment in Europe after what has been a long and dismal period of crisis. Vêron, Nicolas. 2013. ■■ http://www.elibrary.imf.org/view/IMF071/20900- “A Realistic Bridge towards European Banking 9781484304464/20900-9781484304464/20900- Union.” Bruegel Policy Contribution Issue 2013/09, 9781484304464.xml Bruegel, Brussels. New obstacles to the European banking union have Tressel, Thierry, Shengzu Wang, Joong emerged during the past year, but a successful tran- Shik Kang, Jay Shambaugh, Jörg Decres- sition remains both necessary and possible. The key sin, and Petya Koeva Brooks. 2014. next step will be in the second half of 2014, when the “Adjustment in Euro Area Deficit Countries: Prog- European Central Bank will gain supervisory authority ress, Challenges, and Policies.” Staff Discussion Note over most of Europe’s banking system. This needs to be 14/7, International Monetary Fund, Washington. preceded by a rigorous balance sheet assessment that is likely to trigger significant bank restructuring, for Imbalances within the euro area have been a defin- which preparation has barely started. It will be much ing feature of the crisis. This paper provides a critical more significant than current discussions about a bank analysis of the ongoing rebalancing of euro area deficit resolution directive and bank recapitalization by the economies (Greece, Ireland, Portugal, and Spain) that European Stability Mechanism. accumulated large current account deficits and external ■■ http://www.bruegel.org/download/ liability positions in the run-up to the crisis. It shows parent/783-a-realistic-bridge-towards-europe- that relative price adjustments have been proceeding an-banking-union/file/1669-a-realistic-bridge-to- gradually. Real effective exchange rates have depre- wards-european-banking-union/ ciated by 10–25 percent, driven largely by reductions in unit labor costs due to labor shedding. Although 4  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar CITIES AND CITIZENS: Challenges for Inclusive Development Sponsored by the World Bank Group’s Social, Urban, Rural and Resilience Global Practice, the Governance Global Practice and the Fragility and Conflict Cross Cutting Solution Area W hat types of institutions make a city inclusive and its citizenry healthy and prosperous? How can opportunities be created for the urban poor? What policies can address crime and violence? Can new technologies bridge the gap between citizens and governments? Development leaders will discuss the transformative power of inclusive institutions and cit- izen engagement for enhancing accountability and improving public services for the poor. The panel will address the relationship among key elements of inclusiveness—institutions, gover- nance, and citizen engagement—against the backdrop of rapid urbanization and social change, growing inequality and rising crime and violence. 5  Flagship Seminars | RECOMMENDED READING Cities and Citizens: Challenges for Inclusive Development Benouaret, Karim, Raman Valliyur-Ramal- challenges and means for government to provide ser- ingam, and François Charoy. 2013. vices to the public. An example is the CovJam online venture presented by Coventry City and IBM that “CrowdSC: Building Smart Cities with Large-Scale used social media as part of a three-day brainstorm- Citizen Participation.” Internet Computing, IEEE 17 ing event about the city. Social media have facilitated (6): 57–63. government programs to carry out surveys and fine- A platform that connects citizens effectively to local tune services, but perhaps the greatest aspect is that of government, letting them contribute to their com- greater public participation. Moving forward, it will be munity’s general well-being, would be an elegant way important to address social media across public sectors to make cities smarter. CrowdSC is a crowdsourcing and establish strategies to leverage its advantages and framework designed for smarter cities. The frame- benefits. work lets users combine data collection, selection, and ■■ http://dx.doi.org/10.1080/23258020.2013.824250 assessment activities in a crowdsourcing process to achieve sophisticated goals within a predefined con- text. Depending upon this process’s execution strategy, Foth, Marcus, Laura Forlano, Christine different outcomes are possible. The authors describe Satchell, and Martin Gibbs, eds. 2011. CrowdSC’s process model and evaluate three execution From Social Butterfly to Engaged Citizen: Urban strategies. Informatics, Social Media, Ubiquitous Computing, and ■■ http://dx.doi.org/10.1109/MIC.2013.88 Mobile Technology to Support Citizen Engagement. Cambridge, Massachusetts: MIT Press. Bezdek, Barbara L. 2014. Web 2.0 tools, including blogs, wikis, and photo-shar- ing and social-networking sites, have made possi- “Citizen Engagement in the Shrinking City: Toward ble a more participatory Internet experience. From Development Justice in an Era of Growing Inequal- Social Butterfly to Engaged Citizen examines how this ity.” St. Louis University Public Law Review 33 (3): increasingly open, collaborative, and personalizable 3–54. technology is shaping not just our social interactions This paper argues that enhanced public participation but new kinds of civic engagement with cities, com- rules are necessary and feasible in local-govern- munities, and spaces. It offers analyses and studies ment-level decisions to provide public support for from around the world that explore how the power of urban economic redevelopment projects. The paper social technologies can be harnessed for social engage- examines the burgeoning field of community engage- ment in urban areas. Chapters by leading researchers ment practices and process models and considers their study technological innovations for improving civic utility to enhance public participation of traditionally engagement and discuss design research approaches for under-included poor and minority people in redevel- understanding the development of sentient real-time opment decisions. The author preliminarily restates cities, including interaction portals and robots. and revises the Arnstein ladder, proposing additional ■■ http://mitpress.mit.edu/books/social-butterfly-en- functional and legal dimensions, and proposes prin- gaged-citizen ciples for the design of citizen engagement practices in municipal development decision making, identify- ing steps for citizens and city officials to take toward Ghadarjani, Razieh, Nima Gheitarani, and development justice. Mojtaba Khanian. 2013. ■■ http://digitalcommons.law.umaryland.edu/cgi/ “Examination of City Governorship Pattern and viewcontent.cgi?article=2451&context=fac_pubs Citizen Participation as a New Approach to City Management in Region 5 of Isfahan Municipality Using T-Test in SPSS.” European Online Journal of Burton, Victoria. 2013. Natural and Social Sciences 2 (4): 601–08. “Social Media: Its Emerging Importance and Impact The present article attempts to analyze the attitudes on Citizen Engagement.” International Affairs Fo- toward people’s management of the city and the effec- rum 4 (1): 98–100. tive factors in citizens’ participation in city manage- This article examines the impact of social media that ment based on the findings of a field study of the re- not only provide citizens alternative avenues to express gion 5 of Isfahan municipality. Data were collected via themselves about government policies but present new library, documentary, survey, and descriptive-analytical 6  Flagship Seminars | RECOMMENDED READING Cities and Citizens: Challenges for Inclusive Development studies. It was found that although the institutions Kim, Soojin, and Hindy Lauer Schachter. and organizations have been discussing the theme of 2013. participation, its true sense and institutionalization “Citizen Participation in the Budget Process and among the authorities and citizens, especially in the Local Government Accountability: Case Studies of society under study, is a problem that requires further Organizational Learning from the United States and study and guidelines. South Korea.” Public Performance and Management ■■ http://european-science.com/eojnss/article/ Review 36 (3): 456–71. view/203/pdf Citizen participation in budgeting can be a govern- mental mechanism to minimize organizational learn- Gigler, Bjorn Soren, and Savita Bailur, eds. ing pathologies resulting from sole reliance on an ad- 2014. ministrative accountability model. This study analyzes Closing the Feedback Loop: Can Technology Bridge case studies of Los Angeles, California, and Bukgu, the the Accountability Gap? Washington: World Bank Republic of Korea, to show how participative budget- Group. ing combines exploration and refinement strategies to create processes that foster information exchange The report aims to address the following four main between citizens and public officials. Although the questions: How do new technologies empower analysis finds representativeness problems in both communities through participation, transparency, and cases, scholars, administrators, and citizen advocates accountability? Are technologies an accelerator for should have an interest in the narratives on how cities closing the accountability gap—the space between construct and refine processes that can improve citi- supply (governments, service providers) and demand zen-administrator information exchange. (citizens, communities, civil society organizations) that must be bridged for open and collaborative gover- ■■ http://mesharpe.metapress.com/con- nance? Under what conditions does this occur? What tent/94302418360u5386/ are the experiences and lessons learned from existing grassroots innovators and donor-supported citizen Lakhani, Sadaf, and Alys M. Willman. engagement and crowdsourcing programs, and how 2014. can these programs be replicated or scaled up? “Trends in Crime and Violence in Papua New Guin- ■■ http://documents.worldbank.org/curat- ea.” Research and Dialogue Series: The Socio-eco- ed/en/2014/05/19556545/closing-feed- nomic Costs of Crime and Violence in Papua New back-loop-can-technology-bridge-accountabili- Guinea Paper 1, World Bank Group, Washington. ty-gap Crime and violence are widely viewed as posing a considerable challenge to development in Papua New Kilcullen, David. 2013. Guinea (PNG). Various commentators and surveys Out of the Mountains: The Coming Age of the Urban estimate that violence victimization rates in PNG are Guerrilla. New York, New York: Oxford University among the highest in the world. This paper presents Press. some preliminary findings regarding the prevalence of crime and violence in PNG. It was prepared as part This is a book about future conflicts and future cities, of a broader study to understand the socioeconomic and about the challenges and opportunities that four costs of crime and violence to businesses, government powerful megatrends—population, urbanization, agencies, civil society organizations, and households in coastal settlement, and connectedness—are creating PNG. The different data sources are reviewed, and the across the planet. It is also about what cities, commu- most significant challenges with the data available are nities, and businesses can do to prepare for a future in noted in Annex 1. which all aspects of human society—including, but not limited to, conflict, crime, and violence—are changing ■■ http://documents.worldbank.org/curated/ at an unprecedented pace. It offers a compelling case en/2014/05/20037306/trends-crime-violence-pap- on the spread of urban warfare in coastal cities across ua-new-guinea the world, representing the future of conflict. ■■ http://global.oup.com/academic/product/out-of- the-mountains-9780199737505 7  Flagship Seminars | RECOMMENDED READING Cities and Citizens: Challenges for Inclusive Development Lall, Somik V., Om Prakash Agarwal, World Bank. 2013. David Dowall, Michael Klein, Nancy Loza- Fostering Citizen Engagement through Public Consul- no-Gracia, and Hyoung Gun Wang. 2013. tations in Jordan, Morocco, and Tunisia. Washington: Planning, Connecting, and Financing Cities - Now: World Bank. Priorities for City Leaders. Washington: World Bank Group. To support citizen engagement through public consul- tations in the Middle East and Northern Africa, the This report provides mayors and other policymakers World Bank Institute and the World Bank Middle with a policy framework and diagnostic tools to antic- East and North Africa Vice-Presidency organized a ipate and implement strategies that can prevent their knowledge exchange series bringing together gov- cities from locking into irreversible physical and social ernment officials and civil society practitioners from structures. It provides a framework to help city leaders Morocco, Jordan, and Tunisia to discuss how citizen make informed decisions for sustainable development engagement can contribute to more informed and in their cities. Putting financing first, without full inclusive policies and laws. The highlights of this re- consideration of the other dimensions, is a mistake port include (1) the latest developments around public because it often neglects the overriding need to coordi- consultations in their respective countries; (2) recogni- nate infrastructure improvements (connecting) with tion of the limited legal framework for public consul- policies (planning). And the lack of such coordination tations in Tunisia and Jordan, while in Morocco there will be regretted by later urban generations. are constitutional provisions; and (3) agreement on the ■■ http://documents.worldbank.org/curated/ need to develop mechanisms to conduct and evaluate en/2013/01/17197253/planning-connecting-fi- public consultations. nancing-cities-now-priorities-city-leaders ■■ http://documents.worldbank.org/curated/ en/2013/01/17910190/fostering-citizen-engage- ment-through-public-consultations-jordan-mo- World Bank. 2011. rocco-tunisia Crime and Violence in Central America: A Development Challenge. Washington: World Bank. World Bank. 2013. Crime and violence are now a key development issue Inclusion Matters: the Foundation for Shared for Central American countries. In three nations, Prosperity. Washington: World Bank. El Salvador, Guatemala, and Honduras, crime rates are among the top five in Latin America. The report Today, the world is at a juncture at which issues of argues that successful strategies require actions along exclusion and inclusion are assuming new significance multiple fronts, combining prevention and criminal for both developed and developing countries. This justice reform with regional approaches in the areas of report tries to put boundaries around the abstraction drug trafficking and firearms. It also argues that inter- that is “social inclusion.” Placing the discussion of ventions should be evidence based, starting with a clear social inclusion within global transitions and transfor- understanding of the risk factors involved and ending mations, the report argues that social inclusion is an with a careful evaluation of how any planned action evolving agenda. It offers two easy-to-use definitions might affect future options. In addition, the design and a framework to assist practitioners in asking, of national crime-reduction plans and the establish- outlining, and developing some of the right questions ment of national cross-sectoral crime commissions are that can help advance the agenda of inclusion in differ- important steps to coordinate the actions of different ent contexts. This report builds on previous analytical government branches, ease cross-sectoral collaboration, work, especially by the World Bank, on themes that and prioritize resource allocation. touch upon social inclusion, including multidimen- ■■ http://www-wds.worldbank.org/external/default/ sional poverty, inequality, equity, social cohesion, and WDSContentServer/WDSP/IB/2011/04/19/ empowerment. 000333038_20110419233141/Rendered/PD- ■■ http://documents.worldbank.org/curated/ F/567810ESW0P0951white0cover01PUBLIC1.pdf en/2013/01/18410713/inclusion-matters-founda- tion-shared-prosperity 8  Flagship Seminars | RECOMMENDED READING Cities and Citizens: Challenges for Inclusive Development Zahra, Kanwal, Khalid Majeed, Afzal Mahmood, and Muzaffar Asad. 2012. “Impact Assessment of Community Participation in Solid Waste Management Projects in Selected Areas of Faisalabad City.” Journal of Urban Planning and Development 138 (4): 319–27. This paper attempts to determine the impact of community participation projects on the management of solid waste in some selected areas of Faisalabad, Pakistan. The government of the Punjab province initiated a project to upgrade the environment and solid waste management system in Faisalabad in dif- ferent phases. This project was thought to be successful because it created a great sense of ownership among the residents of that particular society. With the help of questionnaire techniques, 800 households and shops in commercial areas were surveyed. The results have shown that the awareness campaign had a highly sig- nificant impact on the mindset of people. The behavior of people toward solid waste management has also been changed. ■■ http://dx.doi.org/10.1061/(ASCE)UP.1943- 5444.0000127 9  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar CNN DEBATE ON THE GLOBAL ECONOMY Sponsored by the IMF’s Research Department and Communications Department A n uneven global recovery continues but growth has weakened in 2014—reflecting a surprisingly weak first quarter in the United States and a less optimistic outlook for several large emerging market economies. Global growth is expected to rebound but downside risks remain a concern. Market conditions have noticeably eased alongside disappointing growth, but risks to financial stability are a key concern from an extended period of low rates and from a possible reversal of recent risk spread and volatility compression. Geopolitical risks have risen in some corners. Looking ahead, global growth could be weaker for longer. Robust demand momentum in advanced economies has yet to emerge, and supply-side constraints and tighter financial conditions over the past year in some major emerging market economies weigh on growth. Amid these economic and financial worries, there is renewed interest on exchange rates and reform of an international monetary system with de facto dollar dominance. The debate will focus on how policymakers could collaborate globally to better manage the risks and durably boost jobs and growth. 10  Flagship Seminars | RECOMMENDED READING CNN Debate on the Global Economy Akerlof, George, Olivier Blanchard, David Carstens, Agustín. 2014. Romer, and Joseph Stiglitz, eds. 2014. “Emerging Market Economies - Challenges and What Have We Learned? Macroeconomic Policy after How to Move Forward.” Speech at the Economic the Crisis. Cambridge, Massachusetts: MIT Press. Club of New York, New York, March 28. This book brings together leading economists and In this speech, Mr. Carstens lays out the challenges economic policymakers to discuss the slowly emerging that face emerging market economies and provides contours of the macroeconomic future. Contributors a three-pillar approach to find their way out. He consider the lessons learned from the crisis and its underscores the importance of strong fundamentals aftermath. They discuss, among other things, post- and policy settings, external sector resilience under crisis questions about the traditional policy focus on stress scenarios, and improving potential GDP growth inflation; macroprudential tools (which focus on the through competitiveness and increasing total factor stability of the entire financial system rather than of productivity. individual firms) and their effectiveness; fiscal stimulus, ■■ http://www.bis.org/review/r140515c.pdf public debt, and fiscal consolidation; and exchange rate arrangements. Caruana, Jaime. 2014. Bayoumi, Tamim, Giovanni Dell’Ariccia, “Stepping Out of the Shadow of the Crisis: Three Karl Habermeier, Tommaso Mancini-Griffo- Transitions for the World Economy.” Speech at the li, Fabián Valencia, and an IMF Staff Team. Bank for International Settlements Annual General 2014. Meeting, Basel, June 29. “Monetary Policy in the New Normal.” Staff Dis- In this speech, Mr. Caruana offers the BIS’s view cussion Note 14/3, International Monetary Fund, on current challenges and aims to examine policies Washington. that might help stepping out of the long shadow of the crisis. The BIS approach is to seek a long-term The global financial crisis challenged the existing perspective with a view to shedding light on both the monetary policy paradigm. Before the crisis, dangerous buildup of financial imbalances before the crisis and financial imbalances grew under stable output gaps their lasting consequences. Mr. Caruana highlights and low inflation. After the bust, a massive stimu- three transitions that the global economy needs to step lus mitigated the downturn, but could not prevent beyond the shadows of the crisis and toward patterns the deepest recession since the Great Depression, as of growth that are less debt driven and therefore more policy rates rapidly hit the zero lower bound, and large sustainable, toward a more normal monetary policy, swings in capital flows complicated macroeconomic and toward a more reliable financial system. management in small open economies. This has led to an intense discussion about what shape monetary ■■ http://www.bis.org/speeches/sp140629.pdf policy should take once economic conditions have settled down into the postcrisis “new normal.” This Caruana, Jaime, and Benjamin H. Cohen. paper reviews the current state of the debate to extract 2014. common policy conclusions where possible, and lays “Five Questions and Six Answers about Macropru- out the unresolved issues where extracting such con- dential Policy.” Banque de France Financial Stability clusions is not possible. Review 18: 15–23. ■■ http://www.elibrary.imf.org/view/IMF006/21217- 9781475561784/21217-9781475561784/21217- This article provides six answers to the following five 9781475561784.xml?rskey=L47vAo&result=2 questions: when can we properly describe a policy as “macroprudential”? Is macroprudential policy in dan- ger of being overburdened or misused? How can con- flicts between monetary and macroprudential policy be resolved? Is independence needed for macroprudential policy? Is international cooperation a good idea when using macroprudential policy? ■■ https://www.banque-france.fr/fileadmin/user_up- load/banque_de_france/publications/FSR18_ Caruana.pdf 11  Flagship Seminars | RECOMMENDED READING CNN Debate on the Global Economy Cubeddu, Luis, Alexander Culiuc, Ghada Fischer, Stanley. 2014. Fayad, Yuan Gao, Kalpana Kochhar, An- “The Great Recession: Moving Ahead.” Remarks at nette Kyobe, Ceyda Oner, and others. a Conference Sponsored by the Swedish Ministry of 2014. Finance, Stockholm, August 11. “Emerging Markets in Transition: Growth Pros- pects and Challenges.” Staff Discussion Note 14/06, In this speech, Mr. Fischer discusses three key aspects International Monetary Fund, Washington. of the challenges policymakers face as they seek to move ahead: (1) the impact of the Great Recession After a short-lived slowdown in the immediate and the associated global financial crisis on the growth aftermath of the global financial crisis and a swift of output, both in the short term and over the longer rebound, emerging markets are now entering a period term; (2) the reform of the financial sector—how of slower growth. In fact, growth is now lower than the much progress has been made in creating a safer and postcrisis peak of 2010–11, as well as the rates seen in more stable postcrisis financial environment; and the decade before the crisis. This raises the question (3) the impact of the crisis on the conduct of mone- of whether emerging markets can bounce back to the tary policy, in particular, how to balance the goals of growth rates seen in the last decade or whether their achieving stable inflation and full employment while prospects are dimmer than thought a few years ago. also taking into account the need to maintain financial This paper explores the drivers of the slowdown, how stability. changes in external conditions that supported high ■■ http://www.federalreserve.gov/newsevents/speech/ growth in emerging markets will affect them over the fischer20140811a.pdf medium term, and the policy priorities needed to sus- tain the growth rates seen in the past decades. In doing so, the paper differentiates emerging markets along International Monetary Fund. 2014. various dimensions (for example, degree of commodity “IMF Multilateral Policy Issues Report: 2014 Spill- dependence, trade and financial openness) to highlight over Report.” Policy Paper, International Monetary the need to tailor policy priorities. Fund, Washington. Global spillovers have entered a new phase. With cri- Draghi, Mario. 2014. sis-related spillovers and risks fading, changing growth “Monetary Policy Communication in Turbulent patterns are the main source of spillovers in the global Times.” Speech at the Conference “De Nederland- economy at this juncture. The report examines two sche Bank 200 Years: Central Banking in the Next key trends that are highly relevant for spillovers. First, Two Decades,” Amsterdam, April 24. signs of self-sustaining recovery in some advanced economies indicate that the unwinding of exceptional In this speech, Mr. Draghi highlights the importance monetary accommodation will proceed and lead to a of communication and transparency for central banks tightening of global financial conditions in the coming like the European Central Bank (ECB) in recent de- years. An uneven recovery, though, suggests normal- cades, and how it will become even more important in ization will proceed at different times in different the decades to come. He discusses how “management countries, with possible spillover implications. Second, by expectations,” while working relatively well in nor- growth in emerging markets is slowing on a broad mal times, makes the decision-making process more basis since its precrisis peak and can carry noticeable complicated during times of crisis and makes policies spillover effects at the global level. more difficult for the general public to understand. He further lays out the ECB’s forward guidance policy, ■■ http://www.imf.org/external/np/pp/ which aims to give guidance on the expected level of eng/2014/062514.pdf future interest rates and to remove uncertainty about that level by strengthening communication on the ECB’s reaction function. ■■ http://www.bis.org/review/r140424b.pdf 12  Flagship Seminars | RECOMMENDED READING CNN Debate on the Global Economy International Monetary Fund. 2014. Rajan, Raghuram. 2014. Global Prospects and Policy Challenges. Washington: “Concerns about Competitive Monetary Easing.” International Monetary Fund. Remarks at the 2014 BOJ-IMES “Conference on Monetary Policy in a Post-Financial Crisis Era,” This note was prepared for the meetings of G20 Tokyo, May 28. Finance Ministers and Central Bank Governors, September 20-21, 2014, held in Cairns, Australia. An In this speech, Mr. Rajan highlights two concerns uneven global recovery continues, despite setbacks this about competitive monetary easing. First, uncon- year. Alongside supportive central bank policies, finan- ventional policies tend to be feasible when domestic cial conditions have continued easing over the last few commercial banks are willing to accumulate significant months. Looking forward, the global recovery should central bank reserves without question. But those are regain strength but downside risks have risen. Poli- typically situations in which lending is unattractive— cy priorities are as follows: (1) Advanced economies because of debt overhang, structural problems, or should continue accommodative monetary policies, simply weak demand. Second, such policies prompt a given still large output gaps and very low inflation; (2) reaction by foreign central banks in both competitor In emerging economies, the focus of macroeconomic industrial countries and in emerging markets. These policies should remain on rebuilding buffers and ad- may espouse unconventional policies once again to dressing vulnerabilities, in preparation for an environ- avoid exchange rate appreciation or capital inflows. ment characterized by higher interest rates and tighter ■■ http://www.bis.org/review/r140528c.pdf external financing conditions; (3) Decisive structural reforms are needed across G20 economies to boost potential output and help ensure that growth is more Sahay, Ratna, Vivek Arora, Thanos sustainable; and (4) If there is infrastructure invest- Arvanitis, Hamid Faruqee, Papa N’Diaye, ment in economies with clearly identified needs and Tommaso Mancini-Griffoli, and an IMF economic slack, then current conditions are favorable Team. 2014. for increasing public infrastructure investment. “Emerging Market Volatility: Lessons from the Ta- ■■ http://www.imf.org/external/np/g20/091714.htm per Tantrum.” Staff Discussion Note 14/09, Interna- tional Monetary Fund, Washington. Lagarde, Christine. 2014. The paper examines the impact of the Federal Re- “The Road to Sustainable Global Growth—The serve’s policy announcements on asset prices and Policy Agenda.” Speech at the School of Advanced capital flows into and out of emerging markets, and International Studies, Washington, April 2. explains the differentiated reaction across countries by looking at domestic and external factors, with a view In this speech, Ms. Lagarde begins with what will be a to drawing broad policy lessons. The paper finds that priority issue. At a time when the world is still recov- the Federal Reserve’s monetary policy announcements ering from the Great Recession—and at a time when appear to be correlated with movements in asset prices geopolitical tensions are rising—how can we strength- and capital inflows in emerging markets; however, en the international cooperation that is key to address- good macroeconomic fundamentals in emerging mar- ing these challenges? Certainly the global economy has kets matter and help dampen market reactions to U.S. stabilized since the onset of the financial crisis, but the monetary policy shocks. Clear and effective communi- recovery is too weak for comfort. She highlights the cation by advanced economies’ central banks consid- challenges facing the world economy and offers some ering exit from unconventional monetary support and policy suggestions to improve medium-term growth. enhanced global cooperation, including a strong global ■■ http://www.imf.org/external/np/speech- financial safety net, may offer emerging markets effec- es/2014/040214.htm tive protection against market volatility as the global economy makes the transition away from large-scale liquidity support. ■■ http://elibrary.imf.org/view/IMF006/21608- 9781498318204/21608-9781498318204/21608- 9781498318204.xml 13  Flagship Seminars | RECOMMENDED READING CNN Debate on the Global Economy Summers, Lawrence H. 2014. Zhou, Xiaochuan. 2009. “U.S. Economic Prospects: Secular Stagnation, “Reform the International Monetary System.” BIS Hysteresis, and the Zero Lower Bound.” Business Review 41: 1–3. Economics 49 (2): 65–73. Mr. Zhou explores the answer to the long-existing but The nature of macroeconomics has changed dramat- still unanswered question: what kind of international ically in the last seven years. Now, instead of being reserve currency do we need to secure global financial concerned with minor adjustments to stabilize about stability and facilitate world economic growth, which a given trend, concern is focused on avoiding secu- was one of the purposes for establishing the IMF? He lar stagnation. Much of this concern arises from the lays out a vision for an international monetary system long-term effects of short-term developments and the that is disconnected from individual nations and is inability of monetary policy to accomplish much more able to remain stable in the long run, thus removing when interest rates have already reached their lower the inherent deficiencies caused by using credit-based bound. This address analyzes contemporary macroeco- national currencies. nomic problems and proposes solutions to put the U.S. ■■ http://www.bis.org/review/r090402c.pdf economy back on a path toward healthy growth. ■■ http://larrysummers.com/wp-content/up- loads/2014/06/NABE-speech-Lawrence-H.-Sum- mers.pdf 14  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar ETHICS AND FINANCE Sponsored by the IMF’s Legal Department and Communications Department I n the wake of the crisis, we are witnessing a depletion of trust and a loss of faith in markets—with evident implications for financial stability, economic growth, and social cohesion. As a result, economists and policymakers are increasingly coming to the view that economic concerns cannot be divorced from ethical concerns. This seminar would facilitate a discussion of these issues, bringing together leading policymakers and other thinkers on the topic from a broad range of fields including the financial sector, academia, and religion. The discussion will reflect upon the continued tendency of the financial sector to prize short-term personal gain over longer-term social purpose; it will also explore implications of the idea that financial markets (and capitalism in general) are only sustainable if there is trust in the system, which in turn requires minimal standards of ethics and integrity. 15  Flagship Seminars | RECOMMENDED READING Ethics and Finance Carney, Mark. 2013. Economist Intelligence Unit. 2013. “Rebuilding Trust in Global Banking.” Remarks at A Crisis of Culture: Valuing Ethics and Knowledge in the 7th Annual Thomas d’Aquino Lecture on Lead- Financial. London: Economist Intelligence Unit. ership, Lawrence National Centre for Policy and Management, London, Ontario, February 25. This report examines the role of integrity and knowl- edge in restoring culture in the financial services in- ■■ http://www.bankofcanada.ca/wp-content/up- dustry. The report looks at the global financial services loads/2013/02/remarks-250213.pdf industry’s record on ethical conduct, investigates the level of knowledge financial services executives have of their own firms and of their industry, and explores the Carney, Mark. 2014. role that greater knowledge plays in building a stronger “Inclusive Capitalism - Creating a Sense of the culture within financial services firms. Systemic.” Speech at the Conference on Inclusive ■■ http://www.economistinsights.com/sites/default/ Capitalism, London, May 27. files/LON%20-%20SM%20-%20CFA%20WEB.pdf Inclusive capitalism is fundamentally about delivering a basic social contract comprising relative equality of Erhard, Werner, and Michael C. Jensen. outcomes, equality of opportunity, and fairness across 2014. generations. Different societies will place different weights on these elements, but few would omit any “Putting Integrity into Finance: A Purely Positive of them. Societies aspire to this trinity of distributive Approach.” Finance Working Paper 417/2014, Euro- justice, social equity, and intergenerational equity for at pean Corporate Governance Institute, Brussels. least three reasons. First, there is growing evidence that The scandals in the world of finance, with their relative equality is good for growth. Second, research damaging effects on value and human welfare, argue suggests that inequality is one of the most important strongly for an addition to the current paradigm of determinants of relative happiness, and that a sense financial economics. The authors summarize a new of community is a critical determinant of well-being. theory of integrity that reveals integrity as a pure- Third, they appeal to a fundamental sense of justice. ly positive phenomenon with no normative aspects ■■ http://www.bis.org/review/r140528b.pdf whatsoever. Adding integrity as a positive phenome- non to the paradigm of financial economics provides actionable access to the source of the behavior that has Cosgrove-Sacks, Carol, and Paul H. resulted in those damaging effects on value and human Dembinski, eds. 2012. welfare, thereby significantly reducing that behavior. Trust and Ethics in Finance: Innovative Ideas from the ■■ http://papers.ssrn.com/sol3/papers.cfm?abstract_ Robin Cosgrove Prize. Geneva: Globalethics.net. id=1985594 The 23 best papers submitted for the competitions for the Robin Cosgrove Prize between 2006 and Lagarde, Christine. 2014. 2011 offer a range of perspectives on why ethics is considered to be important both in terms of personal “Economic Inclusion and Financial Integrity.” conduct of finance professionals and the operation of Address prepared for the Conference on Inclusive financial markets and institutions. Part I introduces Capitalism, London, May 27. the Robin Cosgrove Prize and its global reach. In Part ■■ https://www.imf.org/external/np/speech- II the papers examine systemic issues. Part III, Ethics es/2014/052714.htm in Finance-Standards and Values, focuses on factors affecting the behavior of finance professionals. In Part IV the authors view ethics in finance in the context of solidarity, micro-finance and micro-credit, social responsibility, and sustainable environmental invest- ment practices. ■■ http://www.globethics.net/docu- ments/4289936/13403236/GE_Global_6_final_1_ web.pdf/106c34b4-03d7-4433-88ae-a4d6a4545712 16  Flagship Seminars | RECOMMENDED READING Ethics and Finance Lewis, Michael. 2014. properly and focus on serving the common good, they contribute greatly to the material and even the Flash Boys: Cracking the Money Code. London: spiritual well-being of society. Recent experience, Allen Lane. however, has also demonstrated the harm caused by Flash Boys is about a small group of Wall Street the failings of businesses and markets. The transfor- employees who figure out that the U.S. stock market mative developments of our era produce problems has been rigged for the benefit of insiders and that, alongside their benefits: inequality, economic dislo- since the financial crisis, the markets have become not cation, information overload, financial instability, and more free but less, and more controlled by the big Wall many other pressures leading away from serving the Street banks. Working at different firms, they come to common good. Business leaders who are guided by this realization separately; but after they discover one ethical social principles can, nonetheless, succeed and another, the flash boys band together and set out to contribute to the common good. reform the financial markets. This they do by creating ■■ http://www.stthomas.edu/cathstudies/cst/confer- an exchange in which high-frequency trading—the ences/Logic%20of%20Gift%20Semina/Logicof- source of the most intractable problems—will have no giftdoc/FinalsoftproofVocati.pdf advantage whatsoever. Sen, Amartya. 1993. Ng, Kok-Song. 2004. “Money and Value: On the Ethics and Economics of “Spiritual Capital: An Untapped Resource for a Finance.” Economics and Philosophy 9 (2): 203–27. Sustainable Global Economy.” In Making Capital- ism More Inclusive: Selected Speeches and Essays from Careful assessment of consequences is central to Participants at the Conference on Inclusive Capitalism, financial ethics and cannot be replaced by appeals to edited by Diana Fox Carney and Chrystia Freeland, consequence-independent “duties.” It can be argued, 72–73. London: Coalition for Inclusive Change. giving particular illustrations, that rules and regu- lations as well as codes of conduct may be seriously ■■ http://www.conferenceoninclusivecapitalism2014. misdirected by the attempt to base public decisions or com/IC_ESSAY_Book_2.pdf private behavior on the simple deontology of immedi- ate concerns and obligations. In financial matters, no Oberlechner, Thomas. 2007. less than in other economic fields, the significant goes The Psychology of Ethics in the Finance and Investment well beyond the proximate. Industry. New York, New York: Research Foundation ■■ http://journals.cambridge.org/action/display- of CFA Institute. Abstract?fromPage=online&aid=2797284&file- Id=S026626710000153X The book provides insights into how finance and investment professionals consider ethics in their daily decisions and into the psychological processes that Sijbrand, Jan. 2013. determine how ethical the decisions are. It explores “Ethics and the Crisis in the Financial Sector.” how investment professionals sometimes make morally Speech to the Faculty of Economics and Business of wrong decisions against their better judgment in the University of Groningen, September 5. situations that are crystal clear, but also how they can act most ethically in the midst of conflicting values ■■ http://www.dnb.nl/en/news/news-and-archive/ and despite the temptations and possible rewards for a speech-2013/dnb296149.jsp choice that is less than ethical. ■■ http://www.cfapubs.org/doi/pdf/10.2470/rf.v2007. Welby, Justin. 2014. n2.4697 “The Future of Banking Standards and Ethics.” Archbishop’s Lecture on the Future of Banking Pontifical Council for Justice and Peace. Standards, Westminster, June 25. 2012. ■■ http://www.archbishopofcanterbury.org/articles. “Vocation of the Business Leader: A Reflection.” php/5353/archbishops-lecture-on-the-future-of- Pontifical Council for Justice and Peace, the Vatican. banking-standards When businesses and market economies function 17  Flagship Seminars | RECOMMENDED READING Ethics and Finance World Economic Forum Investors Industries. 2013. “From the Margins to the Mainstream: Assessment of the Impact Investment Sector and Opportunities to Engage Mainstream Investors.” In collaboration with Deloitte Touche Tohmatsu. World Economic Forum, Geneva. Investors have great influence over the social, envi- ronmental, and economic challenges of societies, yet operate within a market infrastructure and investment ecosystem in which the incentives do not generally balance social, environmental, and economic impacts. Impact investing—an investment approach inten- tionally seeking to create both financial return and positive social impact that is actively measured—has been lauded as an emerging investment approach with the potential to reconcile key shortcomings in tradi- tional financial markets. In this report we consult the senior-most decision makers and portfolio managers of the largest and most innovative investors in the world. This approach uniquely helps facilitate a more realistic vantage point on the challenges in scaling the sector. Working with this group is also instrumental in raising awareness and knowledge among key stakeholders for taking impact investing from the margins into the mainstream. ■■ http://www3.weforum.org/docs/WEF_II_From- MarginsMainstream_Report_2013.pdf 18  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar FINANCING ASIA’S NEW GROWTH MODELS Sponsored by the IMF’s Asia and Pacific Department and Monetary and Capital Markets Department A sia is transforming from a manufacturing hub to a group of vibrant, diverse, and interconnected markets with a rising middle-class population. The financial sector needs to serve Asia’s transformation to its new growth models—growth that is more consumption driven and more inclusive, with the private sector playing an increasingly important role. Such a transformation in the region would also have far-reaching effects for the rest of the world. Some key questions for discussion in this session include (1) how can Asia develop a long-term investor base (for example, pension funds and life insurance) to provide a stable source of finance for infrastructure and companies? (2) how can Asia’s financial systems better support small and medium-sized enterprises, start-ups, and the region’s service sectors? and (3) what are the appropriate roles for the private and public sectors in the process of financial development? 19  Flagship Seminars | RECOMMENDED READING Financing Asia’s New Growth Models Baily, Martin Neil, and Douglas J. Elliot. International Monetary Fund. 2014. 2013. “Does Growing Regional Integration Make Asian “The Role of Finance in the Economy: Implications Economies Move More in Sync?” In Regional Eco- for Structural Reform of the Financial Sector.” nomic Outlook: Asia and Pacific—Sustaining Momen- Brookings Institution, Washington. tum: Vigilance and Reforms, 47–60. Washington: International Monetary Fund. The financial system is critical to the functioning of the economy as a whole, and banks are central to the In recent decades, especially during the 1990s, trade financial system. In addition to providing substantial integration within Asia has proceeded faster than in employment, finance serves three main purposes: credit other regions. In valued-added terms, intraregional provision, liquidity provision, and risk management trade grew, on average, by more than 10 percent a services. Many argue that the U.S. financial system year from 1990 to 2012, twice the pace seen outside grew overly large in the bubble period and is still of Asia. While Asia’s overall trade openness today too large today. We agree that some of the activities does not particularly stand out compared with other that took place in the bubble period involved taking regions—partly reflecting the presence of several large, on excess amounts of risk, but it is extremely hard to less open economies—the intensity of intraregional determine the right size of the financial system based trade does stand out, especially within the Association on well-grounded economic theories. of Southeast Asian Nations. Concomitantly, financial ■■ http://www.brookings.edu/~/media/research/files/ integration within the region—as well as between the papers/2013/07/11-finance-role-in-economy-baily- region and the rest of the world—has started to catch elliott/11-finance-role-in-economy-baily-elliott.pdf up, although it still lags behind trade integration. ■■ http://www.elibrary.imf.org/view/IMF086/21109- 9781484316573/21109-9781484316573/ch03.xml Dabla-Norris, Era, and Narapong Srivisal. 2013. “Revisiting the Link between Finance and Macro- International Monetary Fund. 2014. economic Volatility.” Working Paper 13/29, Interna- “Making the Transition from Liquidity- to Growth- tional Monetary Fund, Washington. Driven Markets.” In Global Financial Stability Report: Moving from Liquidity- to Growth-Driven This paper examines the impact of financial depth on Markets, 1–65. Washington: International Monetary macroeconomic volatility using a dynamic panel anal- Fund. ysis for 110 advanced economies and developing coun- tries. We find that financial depth plays a significant Financial stability has broadly strengthened in role in dampening the volatility of output, consump- advanced economies. However, as the United States tion, and investment growth, but only up to a certain makes the transition to a less accommodative mone- point. At very high levels, such as those observed in tary policy stance, global financial conditions are tight- many advanced economies, financial depth amplifies ening, which poses new challenges and reveals vulner- consumption and investment volatility. We also find abilities in some emerging market economies. Those strong evidence that deeper financial systems serve as potential spillovers could, in turn, wash back onto the shock absorbers, mitigating the negative effects of real shores of advanced economies. The key challenge in external shocks on macroeconomic volatility. this environment is to make a successful transition ■■ http://www.elibrary.imf.org/view/IMF001/20248- from policy accommodation to self-sustaining, invest- 9781475543988/20248-9781475543988/20248- ment-driven growth while minimizing spillovers that 9781475543988.xml?rskey=4c81tm&result=1 threaten financial stability. ■■ http://www.elibrary.imf.org/view/IMF082/20957- 9781484357460/20957-9781484357460/ch01.xml 20  Flagship Seminars | RECOMMENDED READING Financing Asia’s New Growth Models Jeasakul, Phakawa, Cheng Hoon Lim, and Mohanty, Madhusudan, and Philip Turner. Erik Lundbac. 2014. 2010. “Why Was Asia Resilient? Lessons from the Past “Banks and Financial Intermediation in Emerging and for the Future.” Working Paper 14/38, Interna- Asia: Reforms and New Risks.” BIS Working Paper tional Monetary Fund, Washington. 313, Bank for International Settlements, Basel. Asia proved to be remarkably resilient in the face of the The conventional view is that microeconomic reforms global financial crisis, but why was its output perfor- after the 1997–98 Asian financial crisis have greatly mance stronger than that of other regions? The paper strengthened banking systems in Asia. Banks have be- shows that better initial conditions—in the form of come better capitalized, external exposures have been lower external and financial vulnerabilities—contribut- reduced, and credit risk has been managed more effec- ed significantly to Asia’s resilience. Key precrisis factors tively. But this conventional view does not take enough included moderate credit expansion, reliance on deposit account of the macroeconomic background. A sharp funding, enhanced bank asset quality, reduced exter- rise in domestic savings, combined with the recent nal financing, and improved current accounts. These large-scale sterilized intervention and easy monetary improvements reflected the lessons from the Asian policy, has led to very easy financing conditions for financial crisis in the late 1990s, which helped reshape banks. Bank credit expanded. Banks have accumulated both public policies and private sector behavior. a large stock of government bonds. How these condi- ■■ http://www.elibrary.imf.org/view/IMF001/21193- tions will change and how this will affect banks in Asia 9781475540284/21193-9781475540284/21193- is uncertain. Supervisory authorities therefore need to 9781475540284.xml be sure that the present very liquid position of most banking systems in Asia does not allow significant (but so far only latent) increases in market and credit risk to Levinger, Hannah, and Chen Li. 2014. go undetected. “What’s behind Recent Trends in Asian Corporate ■■ http://www.bis.org/publ/work313.htm Bond Markets?” Current Issues Emerging Markets, Deutsche Bank AG, Frankfurt am Main. Oliver Wyman Financial Services. 2010. Corporate bond markets in Asia have expanded The Future of Asian Banking. Volume 1. The Shaken rapidly. Since the global financial crisis, Asian cor- and the Stirred: How Regulation and Economic Policy porations have made increasing use of bond issuance Will Transform Asian Banking. New York, New York: for their funding needs, complementing traditional Oliver Wyman Financial Services. channels such as bank lending. The boom in bond issuance, which grew more than fourfold since 2008, Two years on from the depths of the financial crisis, has been fueled by favorable global liquidity conditions governments in the United States and Europe are in and regional initiatives. Asian corporate bond markets the midst of the biggest overhaul of financial sector provide a mixed picture. While the bond markets of regulation in more than 70 years. In much of Asia, Hong Kong SAR, China, Singapore, and Korea are by contrast, the regulatory discussion has returned to comparatively advanced and liquid, markets in China, where it was a few years ago, focused on whether the India, Indonesia, and Thailand are still at an early stage Asian economies are overly dependent on banks for fi- of development. Using data based on bond issuance nancial intermediation, and on whether local financial also reveals variations in structural characteristics such sectors should be more or less integrated with global as sector, currency, issuing volume, and use of funds. capital markets. While the banking sector in the West ■■ http://www.dbresearch.com/ has been shaken, the financial markets of the East are PROD/DBR_INTERNET_EN- stirring. PROD/PROD0000000000328056/ ■■ http://www.oliverwyman.com/content/dam/oli- What%E2%80%99s+behind+recent+trends+in+A- ver-wyman/global/en/files/archive/2010/The_Fu- sian+corporate+bond+markets%3F.PDF ture_of_Asian_Banking_Vol_1.pdf 21  Flagship Seminars | RECOMMENDED READING Financing Asia’s New Growth Models Rhee, Changyong. 2014. World Bank. 2013. “Asia: Achieving Its Potential,” Finance & Develop- “Aging in East Asia and the Pacific.” In World Bank ment 51 (2): 7–9. East Asia and Pacific Economic Update: Rebuilding Policy Buffers, Reinvigorating Growth, 68–75. Wash- ■■ http://www.imf.org/external/pubs/ft/ ington: World Bank. fandd/2014/06/rhee.htm East Asia and the Pacific is in the midst of the most rapid population-aging process ever seen. Aging is Sheng, Andrew, Chow Soon Ng, and driven by declining fertility and increasing life ex- Christian Edelmann. 2013. pectancy, and is occurring at relatively low income Asia Finance 2020: Framing a New Asian Financial levels. It will have major effects on the labor force and Architecture. New York, New York: Oliver Wyman aggregate growth, although with significant differences Financial Services; Hong Kong SAR, China: Fung across countries. The effects may be compounded by Global Institute. urbanization, as a result of lower labor-force partic- ipation rates among the urban elderly. There are also Asia is getting richer, not only absolutely but rela- growing concerns about the elderly poor, as family sup- tively. Over the last decade, Asia increased its share port networks become stretched. Aging raises several of global GDP from 24 percent to 31 percent. Its critical policy challenges: first, extending productive vast population is increasingly urban and increasingly working lives, sustaining the skills of aging workers, middle class. With both Europe and the United States and increasing labor-force participation rates; second, struggling to bounce back from the deep recession reforming pension systems to increase coverage and triggered by the financial crisis, the world is again financial protection, taking into account administrative looking toward Asia as the engine of growth. However, capacity and fiscal sustainability; and third, reforming Asia is also at a crossroads. It needs to shift from its health care systems, including in particular care for the current “old industrial” export-driven model toward a aged and long-term care and through changes in how new economic model—one that is focused on domes- health care providers are paid. tic consumption and is more socially just and environ- mentally sustainable. ■■ http://documents.worldbank.org/curated/ en/2013/10/18362461/rebuilding-policy-buf- ■■ http://www.oliverwyman.com/content/dam/oli- fers-reinvigorating-growth ver-wyman/global/en/files/archive/2013/Asia_Fi- nance_2020.pdf World Bank. 2012. Walsh, James P. 2014. Global Financial Development Report 2013: Rethink- ing the Role of the State in Finance. Washington: “The Future of Asian Finance.” World Bank. Finance & Development 51 (2): 18–21. The report addresses the following key policy ques- ■■ http://www.imf.org/external/pubs/ft/ tions: (1) What is the early postcrisis thinking on fandd/2014/06/walsh.htm transforming regulatory practices around the world? (2) How should governments promote competition in the financial sector without planting the seeds of the next crisis? (3) When do direct government interven- tions—such as state ownership and guarantees—help in developing the financial sector, and when do they fail? (4) What should states do to support robust financial infrastructure? ■■ http://documents.worldbank.org/curated/ en/2012/09/16750906/rethinking-role-state-fi- nance 22  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar FINANCING DEVELOPMENT POST- 2015: Towards a Shared Vision Sponsored by the World Bank Group’s Office of the President’s Special Envoy T he upcoming Post-2015 development agenda will be more ambitious than its predecessor, the Millennium Development Goals. The new agenda embraces concepts of environmental, social and economic sustainability. Achieving these transformational goals will require financing that goes beyond current resources, while focusing on being innovative and inclusive. The event will explore how to facilitate an effective launch of the post-2015 agenda with all partners. It will familiarize Ministries of Finance and Development with the emerging goals, discuss the pillars of a financing approach, and draw upon lessons from case studies that apply a proposed financing framework to countries in diverse circumstances. Hosted jointly with the Multilateral Development Banks as part of the process of preparing a joint paper on issues of financing development, this event will engage high-level representatives of Ministries, the United Nations, the private sector, bilateral agencies, foundations, CSOs, and other development partners. 23  Flagship Seminars | RECOMMENDED READING Financing Development Post-2015: Towards a Shared Vision African Development Bank, Asian Devel- “Introduction to the Proposal of the Open Working opment Bank, European Bank for Recon- Group for Sustainable Development Goals.” Un- struction and Development, European published, July 19. Investment Bank, Inter-American Develop- The Rio+20 outcome document, “The Future We ment Bank, International Finance Corpo- Want,” set out a mandate to establish an open work- ration, International Monetary Fund, and ing group to develop a set of sustainable development the World Bank. Forthcoming. goals for consideration and appropriate action by the “Issues Paper on Financing for Development - Per- General Assembly at its 68th session. It also provided spectives from MDBs.” the basis for their conceptualization. The Rio outcome gave the mandate that the Sustainable Development This is a living document jointly produced by multilat- Goals (SDGs) be coherent with and integrated into eral development banks. It seeks to engage Ministers the UN development agenda beyond 2015. Seventeen of Finance, Economy, and Development, development SDGs have been proposed by this working group, finance partners including the United Nations and oth- building on the foundation laid by the Millennium er international financial institutions, bilateral agencies, Development Goals. These SDGs are accompanied by the private sector, and foundations in a discussion about targets and will be further elaborated through indica- financing after 2015. As part of a global partnership tors focused on measurable outcomes. They are action for development, it contributes to the development of oriented, global in nature, and universally applicable. a financing framework for after 2015, building on the They take into account different national realities, Monterrey and Doha Consensuses. It recognizes that capacities, and levels of development, and respect the ambition of the post-2015 agenda will be associ- national policies and priorities. ated with enormous financing needs, which go beyond the current capacity of many governments and donors, ■■ http://sustainabledevelopment.un.org/focussdgs.html requiring improved domestic revenue mobilization, private investment, financial inclusion and innovation, World Bank Group. 2013. and partnerships. This draft paper will be discussed at the periphery of the 2014 World Bank–IMF Annual “Financing for Development Post-2015.” World Bank Meetings, then further developed at the 2015 World Group, Washington. Bank–IMF Spring Meetings, toward a shared perspec- This paper is a contribution to United Nations–led ef- tive among multilateral development banks ahead of the forts to articulate a post-2015 development framework, Third International Conference on Finance for Devel- building on the Millennium Declaration and Millen- opment in Addis Ababa, Ethiopia, on July 13–16, 2015. nium Development Goals (MDGs). It focuses on the challenge of financing development goals and com- “Report of the Intergovernmental Committee of Experts plements the extensive work conducted by the United on Sustainable Development Financing.” 2014. Final Nations and other institutions, including the World draft, August 8. Bank Group. The report outlines elements of what it The recommendations and analysis in this report are will take to achieve development outcomes; the impor- expected to stimulate discussions among all stakeholders tance of a global development cooperation framework; and inspire new ideas and innovative solutions. Many the role of targeted, evidence-based policies and sound of the recommendations call for exchanging ideas and institutions; and the mobilization of resources for glob- sharing experiences between countries and for enhanced al public goods. It also focuses on how best to support international cooperation based on a renewed global developing countries in mobilizing domestic resources partnership for sustainable development. The scope of for development, by boosting taxation capacity, harness- financing needs, the patterns of resource flows, and the ing natural resource revenue, improving expenditure options for integrated sustainable development financ- efficiency, and curbing illicit financial flows. The authors ing are reviewed with an emphasis on global governance examine issues of aid effectiveness and ways for devel- and cooperation to facilitate and strengthen the financ- opment actors to provide better and smarter aid. Trends ing environment for development objectives. in private financial flows to developing countries and the growing mismatch between available financing and ■■ http://sustainabledevelopment.un.org/content/ investment needs are highlighted. Finally, the report documents/4588FINAL%20REPORT%20IC- explores a range of emerging and innovative sources of ESDF.pdf finance, and the role an inclusive financial system can play to promote development. United Nations Department of Economic ■■ http://documents.worldbank.org/curated/ and Social Affairs, Division for Sustainable en/2013/10/18550431/financing-develop- Development. 2014. ment-post-2015 24  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar FOOD FOR THE FUTURE: Achieving Food Security in the Face of Climate Change Sponsored by the World Bank Group’s Agriculture, Environment and Natural Resources, Transport and Information and Communications Technology, and Water Global Practices O ur ability to feed a growing planet and achieve food security in uncertain and extreme climatic conditions will depend in large part on how we manage already strained natural resources for agriculture and aquaculture. This event will provide a better understanding of the environment-water-food nexus and the role that climate smart agriculture, sustainably managed landscapes and seascapes, and modern monitoring technologies can play in meeting food security and environmental needs. Speakers will represent business, civil society and public sector perspectives on political actions and investment priorities to maintain virtuous cycles that preserve natural capital, build resilience and sustain food security for all. 25  Flagship Seminars | RECOMMENDED READING Food for the Future: Achieving Food Security in the Face of Climate Change Akbar, Sameer, Gary Kleiman, Surabi Me- BMZ Federal Ministry for Economic Coop- non, and Laura Segafredo. 2014. eration and Development. 2013. Climate-Smart Development: Adding up the Benefits “Promoting Sustainable Agriculture: Development of Actions that Help Build Prosperity, End Poverty and Policy Strategy.” Strategy Paper 3|2013e, BMZ Combat Climate Change. Washington: World Bank Federal Ministry for Economic Cooperation and Group. Development, Berlin. This report describes efforts by the ClimateWorks Even though agricultural surpluses are produced in Foundation and the World Bank to quantify the many parts of the world, it has not yet been possible to multiple economic, social, and environmental ben- substantially reduce hunger around the globe. Hunger efits associated with policies and projects to reduce is not primarily the consequence of an absolute lack of emissions in select sectors and regions. The report food but of widespread poverty in rural regions in par- has three objectives: (1) to develop a holistic, adapt- ticular. Against this backdrop, German development able framework to capture and measure the multiple policy focuses on two goals in its bilateral programs, benefits of reducing emissions of several pollutants; (2) in its multilateral commitment, and in its involvement to demonstrate how local and national policymakers, in shaping the international agenda. Agriculture must members of the international development commu- first reduce poverty and hunger, and second it must be nity, and others can use this framework to design and resource conserving and climate neutral. analyze policies and projects; and (3) to contribute a ■■ http://www.bmz.de/en/publications/topics/rural_ compelling rationale for effectively combining climate development/Strategiepapier332_03_2013.pdf action with sustainable development and green growth worldwide. Food and Agriculture Organization of the ■■ http://www-wds.worldbank.org/external/default/ United Nations, the International Fund for WDSContentServer/WDSP/IB/2014/06/20/00045 Agricultural Development, and the World 6286_20140620100846/Rendered/PDF/889080W- Food Programme. 2013. P0v10RE0Smart0Development0Ma.pdf The State of Food Insecurity in the World 2013. The Mul- tiple Dimensions of Food Security. Rome: Food and Arnason, Ragnar, Kieran Kelleher, and Agriculture Organization of the United Nations. Rolf Willmann. 2009. The Sunken Billions: The Economic Justification for The 2013 report goes beyond measuring food depri- Fisheries Reform. Washington: World Bank. vation. It presents a broader suite of indicators that aim to capture the multidimensional nature of food The contribution of the harvest sector of the world’s insecurity, its determinants, and outcomes. This suite, marine fisheries to the global economy is substantially compiled for every country, allows a more nuanced smaller than it could be. The lost economic benefits picture of their food security status, guiding policy- are estimated to be on the order of $50 billion annu- makers in the design and implementation of targeted ally. The losses represent the difference between the and effective policy measures that can contribute to the potential and actual net economic benefits from global eradication of hunger, food insecurity, and malnutri- marine fisheries. By improving governance of marine tion. fisheries, society could capture a substantial part of this ■■ http://www.fao.org/docrep/018/i3434e/i3434e.pdf $50 billion annual economic loss. Through comprehen- sive reform, the fisheries sector could become a basis for economic growth and the creation of alternative Fukuda-Parr, Sakiko, and Amy Orr. 2013. livelihoods in many countries. At the same time, a “The MDG Hunger Target and the Contested nation’s natural capital in the form of fish stocks could Visions of Food Security.” FXB Working Paper, be greatly increased and the negative impacts of the FXB Center for Health and Human Rights, Harvard fisheries on the marine environment reduced. School of Public Health, Cambridge, Massachusetts. ■■ http://documents.worldbank.org/curated/ This paper explores the normative and empirical en/2009/01/10298304/sunken-billions-econom- consequences of the Millennium Development Goal ic-justification-fisheries-reform (MDG) hunger target (1C), to halve the proportion of people who are undernourished, measured by the pro- portion of children under 5 who are underweight for 26  Flagship Seminars | RECOMMENDED READING Food for the Future: Achieving Food Security in the Face of Climate Change their age, and the proportion of people who are “un- Rosegrant, Mark W., Jawoo Koo, Nicola dernourished.” We argue that the influence has been Cenacchi, Claudia Ringler, Richard Rob- more normative (reframing thinking and influencing ertson, Myles Fisher, Cindy Cox, Karen strategies) than empirical (increasing investments Garrett, Nicostrato D. Perez, and Pascale and efforts). The MDG hunger target has had little Sabbagh. 2014. effect in drawing attention to this priority and raising Food Security in a World of Natural Resource Scarcity: its profile. While food security currently commands The Role of Agricultural Technologies. Washington: attention as a top global political priority, it has long International Food Policy Research Institute. been a neglected goal. ■■ http://fxb.harvard.edu/wp-content/uploads/ The world’s population is expected to reach 9 billion sites/5/2013/09/Goal-1_Hunger_FukudaParr_ by 2050. Climate change, population, and income Orr_WorkingPaper.pdf growth will drive food demand in the coming decades. Baseline scenarios show food prices for maize, rice, and wheat would significantly increase between 2005 Lal, Rattan. 2013. and 2050, and the number of people at risk of hunger “Food Security in a Changing Climate.” in the developing world would grow from 881 million Ecohydrology and Hydrobiology 13 (1): 8–21. in 2005 to more than a billion people by 2050. This report examines which current and potential strategies Challenges to global food security are (1) population offer solutions to fight hunger. increase from 7 billion in 2011 to 9.2 billion by 2050; (2) climate change; (3) soil degradation by erosion, ■■ http://www.ifpri.org/publication/food-securi- salinization, organic matter and nutrient depletion, ty-world-natural-resource-scarcity and elemental imbalance; (4) decreased availability of water; (5) land competition for urbanization, brick Tréguer, David, and Eija Pehu. 2014. making, biofuel, and nonagricultural uses; and (6) “Moving toward a Sustainable Landscape Approach preferences for an animal-based diet. Global hotspots to Development.” Agriculture and Environmental for food insecurity are South Asia and sub-Saharan Services Department Notes 12, Washington, World Africa. Adopting concepts of ecohydrology, enhancing Bank Group. green water in the root zone, can create climate-resil- ient agriculture to advance food security and improve Increasing food and nutrition insecurity and increasing the environment. poverty in the face of a rapidly changing climate and ■■ http://www.sciencedirect.com/science/article/pii/ a degrading natural capital base are daunting chal- S1642359313000104 lenges for agriculture, livestock, forests, and fisheries. To address these challenges, the World Bank’s client countries are increasingly seeking support to move Program on Forests. 2012. toward a more integrated approach to managing “Mobilizing Private Investment in Trees and Land- competing demands for land, water, and other natural scape Restoration in Africa.” resources. This desire comes out of simple recognition that it is the most efficient thing to do given the com- Growing demand for food, fuel, and other commodi- plex interlinkages among the different components of ties, coupled with natural resource scarcity, has created natural capital, and most important, it is essential for an urgent need to produce more with less. Program the communities that live in a reality in which all is on Forests (PROFOR) organized with a number connected, that is, in the landscape. of partners a new investment forum to discuss the main constraints to investment and to identify policy ■■ http://documents.worldbank.org/curated/ and institutional reforms needed to overcome those en/2014/06/19607203/moving-toward-sustain- constraints, as well as mechanisms to help create an en- able-landscape-approach-development abling climate for accelerated private sector investment. ■■ http://www.profor.info/node/2062 27  Flagship Seminars | RECOMMENDED READING Food for the Future: Achieving Food Security in the Face of Climate Change World Bank. 2007. World Bank and International Monetary World Development Report 2008: Agriculture for De- Fund. 2012. velopment. Washington: World Bank. Global Monitoring Report 2012: Food Prices, Nutrition, and the Millennium Development Goals. Washington: The 2008 World Development Report calls for greater World Bank. investment in agriculture in developing countries and warns that the sector must be placed at the center Every year, the Global Monitoring Report (GMR) of the development agenda if the goals of halving gauges progress across the Millennium Development extreme poverty and hunger by 2015 are to be realized. Goals (MDGs), so we can better understand whether According to the report, for the poorest people, GDP we are delivering on basic global needs. The 2012 growth originating in agriculture is about four times edition highlights the need to help developing coun- more effective in reducing poverty than GDP growth tries deal with the harmful effects of higher and more originating outside the sector. volatile food prices. It summarizes effects of food ■■ http://web.worldbank.org/WBSITE/EX- prices on several MDGs. It reviews policy respons- TERNAL/EXTDEC/EXTRESEARCH/ es including domestic social safety nets, nutritional EXTWDRS/0,,contentMDK:23062293~pageP- programs, agricultural policies, regional trade policies, K:478093~piPK:477627~theSitePK:477624,00.html and support by the international community. And it outlines future prospects. ■■ http://www-wds.worldbank.org/external/default/ World Bank. 2012. WDSContentServer/WDSP/IB/2012/04/20/ Using Public Food Grain Stocks to Enhance Food Secu- 000386194_20120420035221/Rendered/PDF/ rity. Washington: World Bank. 681710PUB0EPI00SE0ONLY090Box367902B.pdf The recurrent global food price spikes in 2008 and 2010 rekindled interest in the use of national food World Bank Group. 2013. grain stockpiles to enhance food security. They were a World Bank Group Agriculture Action Plan 2013–2015: commonly used instrument in government responses Implementing Agriculture for Development. Washing- to these food price spikes. They were also widely con- ton: World Bank Group. sidered to be a useful tool after the 1974 food crisis and its associated food price volatility and supply dis- The future needs an agricultural system that produc- ruptions. Large stocks became a reality at the global es about 50 percent more food to feed the world’s level in the 1980s and 1990s as a by-product of farm 9 billion people by 2050. It can be done with more income support policies in the developed countries. and better investment in the sector and with more However, large “buffer” or “intervention” stocks, as the attention to reducing gender inequality in access grain accumulations in developed countries came to to resources and opportunities and to addressing be called, eventually proved to be very costly forms cross-sectoral linkages between agricultural actions of producer income support and were drawn down and outcomes for economic growth, livelihoods, the for fiscal and other reasons starting in the late 1990s. environment, nutrition, and public health. Income This report revisits the issues and evidence concern- gains in agriculture are no more costly to achieve ing grain stocks. than income gains in other sectors, and the associated ■■ http://documents.worldbank.org/curated/ growth originating from agriculture has been two to en/2012/09/16687047/using-public-food-grain- four times more effective at reducing poverty than stocks-enhance-food-security growth originating from other sectors. ■■ http://documents.worldbank.org/curated/ en/2013/01/17747135/implementing-agricul- ture-development-world-bank-group-agricul- ture-action-plan-2013-2015 28  Flagship Seminars | RECOMMENDED READING Food for the Future: Achieving Food Security in the Face of Climate Change World Bank Group. 2013. World Bank Group. 2014. Fish to 2030: Prospects for Fisheries and Aquaculture. Learning from World Bank History: Agriculture and Agriculture and Environmental Services Discussion Food-Based Approaches for Addressing Malnutrition. Paper 03, World Bank Group, Washington. Agriculture and Environmental Services Discussion Paper 10. Washington: World Bank Group. The World Bank Group Agriculture Action Plan 2013–15 summarizes critical challenges facing the This paper provides forward-looking recommendations global food and agriculture sector. An ever-increasing for linking agriculture and nutrition by looking back global population necessitates adequate food and nu- over the 40 years since both nutrition and rural devel- trition for the growing population through increased opment began at the World Bank in 1973. This paper production and reduced waste. Production increase sets out to explore whether what is currently being must occur in a context in which resources necessary suggested has been attempted in the past. The initial for food production, such as land and water, are even motivation was to showcase the depth of historical scarcer in a more crowded world. The important issues resources available in the World Bank Group Archives, addressed in the report are (1) the health of global and to demonstrate how they can be used to inform capture fisheries; (2) the role of aquaculture in filling current practice. Several lessons learned primarily the global demand for fish; and (3) implications of from the World Bank experience are applicable to changes in the global fish markets on fish consump- the Bank’s current commitment to nutrition-sensitive tion, especially in China and sub-Saharan Africa. agriculture, as well as to the development community ■■ http://documents.worldbank.org/curated/ at large, which is tackling the same agenda. en/2013/12/18882045/fish-2030-prospects-fisher- ■■ http://documents.worldbank.org/curated/ ies-aquaculture en/2014/06/19755692/learning-world-bank-his- tory-agriculture-food-based-approaches-address- ing-malnutrition 29  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar GROWTH AND REFORM CHALLENGES Sponsored by the IMF’s Strategy, Policy, and Review Department and Research Department D rawing on the themes and lessons from the previous sessions, this concluding session will bring together policymakers and others with practical experience in the reform process to discuss the important dilemmas with which countries must inherently grapple as they seek to implement reforms to deliver job-rich and inclusive growth. Countries recognize that structural reforms are needed to raise medium-term growth prospects, but some reforms may be difficult to sell politically given winners and losers in the short run. A further balance needs to be struck between the scaling up of public infrastructure investment and the accompanying increase in public debt, which exacerbates the already-high debt trajectories in many countries. Similarly, there is concern about the pace and sustainability of global growth and growing concerns about the rise in inequality, yet a balance is needed to ensure that policy measures help reduce inequality without harming growth. Some key questions for discussion in this session include (1) are there better ways to design structural reforms that are both politically and socially more palatable, and that would also achieve the best possible impact in achieving sustained growth? (2) how do countries ensure that the gains from public investment offset the risks flowing from a further debt buildup? and (3) what lessons can we draw from cross-country experience about the impact of reforms on income distribution and growth in the short and medium terms? 30  Flagship Seminars | RECOMMENDED READING Growth and Reform Challenges Acemoglu, Daron, and David Autor. 2010. Bénabou, Roland. 2000. “Skills, Tasks and Technologies: Implications for “Unequal Societies: Income Distribution and the Employment and Earnings.” Working Paper 16082, Social Contract.” American Economic Review 90 (1): National Bureau of Economic Research, Cambridge, 96–129. Massachusetts. This paper develops a theory of inequality and the The authors argue that despite its notable successes, social contract aiming to explain how countries with the canonical model is largely silent on a number of similar economic and political “fundamentals” can central empirical developments of the last three de- sustain such different systems of social insurance, fiscal cades, including (1) significant declines in real wages redistribution, and education finance as those of the of low skill workers, particularly low-skill males; (2) United States and western Europe. With imperfect non-monotone changes in wages at different parts of credit and insurance markets, some redistributive pol- the earnings distribution during different decades; (3) icies can improve ex ante welfare, which implies that broad-based increases in employment in high-skill their political support tends to decrease with inequali- and low-skill occupations relative to middle-skill ty. Conversely, with credit constraints, lower redistribu- occupations (that is, job “polarization”); (4) rapid tion translates into more persistent inequality, leading diffusion of new technologies that directly substitute to the potential for multiple steady states with mutu- capital for labor in tasks previously performed by ally reinforcing high inequality and low redistribution, moderately skilled workers; and (5) expanding off- or vice versa. shoring opportunities, enabled by technology, which ■■ https://www.aeaweb.org/atypon.php?return_to=/ allow foreign labor to substitute for domestic workers doi/pdfplus/10.1257/aer.90.1.96 in specific tasks. ■■ http://www.nber.org/papers/w16082.pdf Cubeddu, Luis, Alex Culiuc, Ghada Fayad, Yuan Gao, Kalpana Kochhar, Annette Kyo- Bastagli, Francesca, David Coady, and be, Ceyda Oner, and others. 2014. Sanjeev Gupta. 2012. “Emerging Markets in Transition: Growth Pros- “Income Inequality and Fiscal Policy.” Staff Discus- pects and Challenges.” Staff Discussion Note 14/06, sion Note 12/08 (Revised), International Monetary International Monetary Fund, Washington. Fund, Washington. After a short-lived slowdown in the immediate This paper focuses on how fiscal policy can address aftermath of the global financial crisis and a swift income inequality in both advanced economies and rebound, emerging markets are now entering a period developing countries. It reviews the relevant literature of slower growth. In fact, growth is now lower than and assembles a comprehensive database on dis- in the postcrisis peak of 2010–11, as well as lower posable income inequality for 22 advanced and 128 than the rates seen in the decade before the crisis. developing economies. It presents the redistributive This raises the question of whether emerging mar- impact of fiscal policy and how it can be enhanced if kets can bounce back to the growth rates seen in the seen as desirable. last decade or whether their prospects are dimmer ■■ http://www.elibrary.imf.org/view/IMF006/12908- than thought a few years ago. This paper explores the 49781475504828/12908-9781475504828/12908- drivers of the slowdown, how changes in external 9781475504828.xml conditions that supported high growth in emerging markets will affect them over the medium term, and the policy priorities needed to sustain the growth rates seen in the past decades. ■■ http://www.elibrary.imf.org/view/IMF006/21358- 9781498327664/21358-9781498327664/21358- 9781498327664.xml?rskey=0fsOCf&result=1 31  Flagship Seminars | RECOMMENDED READING Growth and Reform Challenges Dabla-Norris, Era, Giang Ho, Kalpana Johnson, Simon, Jonathan D. Ostry, and Kochhar, Annette Kyobe, and Robert Arvind Subramanian. 2007. Tchaidze. 2013. “The Prospects for Sustained Growth in Africa: “Anchoring Growth: The Importance of Productiv- Benchmarking the Constraints.” Working Paper ity-Enhancing Reforms in Emerging Market and 07/52, International Monetary Fund, Washington. Developing Economies.” Staff Discussion Note 13/08, International Monetary Fund, Washington. A dozen countries had weak institutions in 1960 and yet sustained high rates of growth subsequently. We Fostering and sustaining robust economic growth is use data on their characteristics early in the growth an imperative across advanced economies, emerging process to create benchmarks with which to eval- market economies, and low-income countries alike. uate potential constraints on sustained growth for Countries will need to focus on supply-side reforms to sub-Saharan Africa. This analysis suggests that what raise their potential output and anchor medium-term are usually regarded as first-order problems—broad growth prospects. This paper emphasizes the role of institutions, macroeconomic stability, trade openness, structural reforms and supportive policy and institu- education, and inequality—may not now be binding tional frameworks for boosting productivity—a key constraints in Africa, although the extent of ill health, engine of economic growth—in the wake of the crisis. internal conflict, and societal fractionalization do stand By examining a broad spectrum of reforms that elimi- out as problems in contemporary Africa. A key ques- nate impediments to growth, the paper seeks to high- tion is to what extent Africa can rely on manufactured light a differentiated policy agenda across countries. exports as a mode of “escape from underdevelopment,” ■■ http://www.elibrary.imf.org/view/IMF006/20913- a strategy successfully deployed by almost all the 9781616357290/20913-9781616357290/20913- benchmark countries. 9781616357290.xml ■■ http://www.elibrary.imf.org/view/IMF001/07234- 9781451866162/07234-9781451866162/07234- 9781451866162.xml International Monetary Fund. 2014. “Sustaining Long-Run Growth and Macroeconomic Stability in Low-Income Countries – The Role of McMillan, Margaret S., and Dani Rodrik. Structural Transformation – Background Notes.” 2011. Policy Paper, International Monetary Fund, Wash- “Globalization, Structural Change and Productivity ington. Growth.” Working Paper 17143, National Bureau of Economic Research, Cambridge, Massachusetts. This policy paper explores the following concepts: (1) A fundamental paradigm of economic theory and em- Large gaps in labor productivity between the tradition- pirics is that economic development involves structural al and modern parts of the economy are a fundamental transformation, the dynamic reallocation of resources reality of developing societies. This paper documents from less productive to more productive sectors. (2) these gaps, and emphasizes that labor flows from While economic transformation and diversification low-productivity activities to high-productivity activ- are correlated with development, it remains unclear ities are a key driver of development. The results show whether a causal relationship exists. (3) The approach that since 1990 structural change has been growth presented here represents the first integrated empirical reducing in both Africa and Latin America, with the treatment of the diversification-growth debate. most striking changes taking place in Latin Ameri- ■■ http://www.imf.org/external/np/pp/en- ca. The bulk of the difference between these regions’ g/2014/030514a.pdf productivity performance and that of Asia is accounted for by differences in the pattern of structural change— with labor moving from low- to high-productivity sectors in Asia, but in the opposite direction in Latin America and Africa. ■■ http://www.nber.org/papers/w17143.pdf 32  Flagship Seminars | RECOMMENDED READING Growth and Reform Challenges Ostry, Jonathan D., Andrew Berg, and Rajan, Raghuram G. 2010. Charalambos G. Tsangarides. 2014. Fault Lines: How Hidden Fractures Still Threaten the “Redistribution, Inequality, and Growth.” Staff Dis- World Economy. Princeton, New Jersey: Princeton cussion Note 14/02, International Monetary Fund, University Press. Washington. This book shows how the individual choices that col- The IMF has recognized in recent years that one can- lectively brought about the economic meltdown were not separate issues of economic growth and stability on rational responses to a flawed global financial order in the one hand and equality on the other. Indeed, there which the incentives to take on risk are incredibly out is a strong case for considering inequality and an in- of step with the dangers those risks pose. It exposes a ability to sustain economic growth as two sides of the system in which America’s growing inequality and thin same coin. Central to the IMF’s mandate is providing social safety net create tremendous political pressure to advice that will enable members’ economies to grow encourage easy credit and keep job creation robust. on a sustained basis. But the IMF has rightly been cautious about recommending the use of redistributive Rodrik, Dani. 1999. policies given that such policies may themselves under- cut economic efficiency and the prospects for sustained “Where Did All the Growth Go? External Shocks, growth (the so-called “leaky bucket” hypothesis writ- Social Conflict, and Growth Collapses.” Journal of ten about by the famous Yale economist Arthur Okun Economic Growth 4 (4): 385–412. in the 1970s). This paper argues that domestic social conflicts are a ■■ http://www.elibrary.imf.org/view/IMF006/21122- key to understanding why growth rates lack persistence 9781484352076/21122-9781484352076/21122- and why so many countries have experienced a growth 9781484352076.xml collapse since the mid-1970s. It emphasizes, in partic- ular, the manner in which social conflicts interact with Ostry, Jonathan D., Alessandro Prati, and external shock on the one hand, and the domestic in- Antonio Spilimbergo. 2009. stitutions of conflict management on the other. Econo- metric evidence provides support for this hypothesis. “Structural Reforms and Economic Performance in Countries that experienced the sharpest drops in growth Advanced and Developing Countries.” Occasional Pa- after 1975 were those with divided societies and with per 268. International Monetary Fund, Washington. weak institutions of conflict management. This volume examines the impact on economic perfor- ■■ http://link.springer.com/arti- mance of structural policies—policies that increase the cle/10.1023/A%3A1009863208706 role of market forces and competition in the economy, while maintaining appropriate regulatory frameworks. Among the key results of this study, the authors find that real and financial reforms boost income growth. However, growth effects differ significantly across alternative reform sequencing strategies: a trade-be- fore-capital-account strategy achieves better outcomes than the reverse, or even than a “big bang”; also, liber- alizing the domestic financial sector together with the external capital account is growth enhancing, provided the economy is relatively open to international trade. ■■ http://www.elibrary.imf.org/view/IMF084/09839- 9781589068186/09839-9781589068186/09839- 9781589068186.xml 33  Flagship Seminars | RECOMMENDED READING Growth and Reform Challenges Schindler, Martin, Helge Berger, Bas B. Teal, Francis. 2011. Bakker, and Antonio Spilimbergo, eds. “Structural Transformation, Employment Creation, 2014. and Labor Markets: The Implications for Poverty Jobs and Growth: Supporting the European Recovery. Reduction in Sub-Saharan Africa.” Paper prepared Washington: International Monetary Fund. for the “Annual Bank Conference on Development Economics” (ABCDE), Paris, May 30–June 11, 2011. Five years after the onset of the global financial crisis, Europe’s economy is still fragile. Notwithstanding This paper reviews the evidence for the links between recent positive signs amid calmer financial markets, structural change and poverty reduction in sub-Sa- medium-term growth is likely to remain frail owing haran Africa. The recent revival of growth in these to continuing weaknesses and vulnerabilities at the economies is placed in a longer-term context and country level and in the fabric of European institutions contrasted with the patterns of more sustained growth and banks, especially in the euro area. In addition, that have characterized other countries. It is argued unemployment in many countries has reached very that this growth revival has been associated with some, high levels. The IMF research collected in this volume but very modest, reductions in poverty rates. The provides a number of guideposts that offer an oppor- extent of structural change over the period since 1980 tunity for stronger and better-balanced growth and is documented and it is shown that together with a employment in Europe after what has been a long and decline in the share of agriculture in GDP has been dismal period of crisis. an accelerating decline in the share of manufacturing ■■ http://www.elibrary.imf.org/view/IMF071/20900- within industry. 9781484304464/20900-9781484304464/20900- ■■ http://siteresources.worldbank.org/EXTABCDE/ 9781484304464.xml Resources/7455676-1292528456380/7626791- 1303141641402/ 7878676-1306270833789/ Structutal_Transformation-Teal.pdf Stiglitz, Joseph E. 2012. The Price of Inequality: How Today’s Divided Society Endangers Our Future. New York, New York: W. W. Norton & Co. This work examines how the wealthy classes have contributed to growing inequality in society and explains how the quest to increase wealth has hindered the country’s economic growth as well as its efforts to solve its most pressing economic problems. The author argues against America’s vicious circle of growing inequality. America currently has the most inequal- ity, and the least equality of opportunity, among the advanced countries. While market forces play a role in this stark picture, politics has shaped those market forces. Here the author exposes the efforts of well- heeled interests to compound their wealth in ways that have stifled true, dynamic capitalism. 34  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar MAKING EXTRACTIVE INDUSTRIES’ WEALTH WORK FOR THE POOR Sponsored by the World Bank Group’s Macroeconomics and Fiscal Management, Energy and Extractives, and Governance Global Practices J oin a discussion on channeling revenues from extractive industries—oil, gas and mining— to end poverty through diversified growth and development. Oil and gas in Tanzania and Mozambique, iron ore in Guinea, copper in Mongolia, gas and gold in Latin America, oil, gas, bauxite and gold in Central Asia. If managed well, these can contribute to sustainable development, but when poorly handled they can present long-term challenges for governments, communities and the environment. How can governments capture and channel revenues from this resource wealth into smart investments? How can they unlock this wealth to make it work for the poor? What can we learn from past experience? 35  Flagship Seminars | RECOMMENDED READING Making Extractive Industries’ Wealth Work for the Poor Barma, Naazneen H., Kai Kaiser, Tuan Calder, Jack. 2014. Minh Le, and Lorena Vinuela. 2012. Administering Fiscal Regimes for Extractive Industries: Rents to Riches? The Political Economy of Natural Re- A Handbook. Washington: International Monetary source–Led Development. Washington: World Bank. Fund. This volume focuses on the political economy sur- Revenues from natural resources often pose unique rounding the detailed decisions that governments challenges for tax administration. This Handbook make at each step of the value chain for natural focuses attention on effectively administering revenues resource management. From the perspective of public from extractive industries. It provides policymakers interest or good governance, many resource-dependent and officials in developing countries and emerging developing countries pursue apparently short-sighted market economies with practical guidelines to establish and sub-optimal policies in relation to the extraction a robust legal framework, organization, and procedures and capture of resource rents, and to spending and for administering revenue from these industries. It dis- savings from their resource endowments. This work cusses transparency and how to promote it in the face contextualizes these micro-level choices and outcomes. of increasing demands for clarity and accountability in ■■ http://www.imf.org/external/np/seminars/ the administration of public revenues from extractive eng/2013/fiscalpolicy/pdf/rajaram.pdf industries, and discusses how developing countries can strengthen their managerial and technical capacity to administer these revenues. Burr, Lars, Ole Therkildsen, Michael W. ■■ http://www.elibrary.imf.org/view/IMF071/20884- Hansen, and Mette Kjær. 2013. 9781475575170/20884-9781475575170/20884- “Extractive Natural Resources Development: Gov- 9781475575170.xml ernance, Linkages and Aid.” Report 2013:28, Danish Institute for International Studies, Copenhagen. Collier, Paul. 2008. This report—based on literature reviews and limited The Bottom Billion: Why the Poorest Countries Are Fail- fieldwork in Mozambique, Tanzania, and Uganda— ing and What Can Be Done About It. New York, New identifies the main factors influencing the political York: Oxford University Press. incentives for African governments to use industrial and other policies to create linkages between ex- This book, published two years before The Plundered tractive industries and other parts of the economy to Planet, includes a chapter focused on those low-in- create jobs, sustain growth, and alleviate poverty. This come countries rich in natural resources, and that governance perspective complements analyses of the argues that these countries are paradoxically usually economic implications of resource-based development worse off than countries not so endowed. This arises strategies, and identifies implications for donor assis- for several reasons, Collier argues. Resources make tance to support development of extractive resources conflict for the resources more likely. Natural resource for growth and poverty reduction. wealth means governments do not need to tax citizens ■■ http://en.diis.dk/files/publications/Reports2013/ who, consequently, are less likely to demand account- DIIS-RP-2013-28_Extractive-dev_lbu-mfl_web.pdf ability from the government on the use of revenues it has collected. Exploitation of natural resources, Collier notes, can also result in Dutch disease, in which a country’s other industries become less competitive as the result of an overvalued currency that results from high demand for the resource. 36  Flagship Seminars | RECOMMENDED READING Making Extractive Industries’ Wealth Work for the Poor Collier, Paul. 2010. Dobbs, Richard, Jeremy Oppenheim, The Plundered Planet: Why We Must, and How We Can, Adam Kendall, Fraser Thompson, Martin Manage Nature for Global Prosperity. New York, New Bratt, and Fransje van der Marel. 2013. York: Oxford University Press. Reverse the Curse: Maximizing the Potential of Resource-driven Economies. New York, New York: Collier proposes a series of international standards McKinsey Global Institute. and policy approaches to help poor countries dis- cover and manage natural resource assets so that the Resource-driven countries need a new growth mod- revenues they produce deliver more positive develop- el to transform the potential resource windfall into ment outcomes. Among other ideas, he proposes that long-term prosperity. This report lays out such a donor countries provide financing for natural resource model, drawing on successful approaches adopted by exploration to ensure that governments can negotiate some resource-driven countries. It has six core ele- with extractive companies on the basis of symmetric ments: building the institutions and governance of the information. He also calls for policy changes to raise resources sector; developing infrastructure; robust fiscal world food supply, and an approach to climate change policy and competitiveness; supporting local content; that acknowledges the benefits of industrialization deciding how to spend a resource windfall wisely; and while addressing the need for alternatives to carbon transforming resource wealth into broader economic trading. Revealing how these are all interconnected, development. The Plundered Planet charts a way forward to avoid the ■■ http://www.mckinsey.com/insights/energy_re- mismanagement of the natural world that threatens sources_materials/reverse_the_curse_maximizing_ our future. the_potential_of_resource_driven_economies Diongue, Abdou Kâ, Gaël Giraud, and Harvey, Bruce. 2014. Cécile Renouard. 2011. “Social Development Will Not Deliver Social “Measuring the Contribution of Extractive Indus- Licence to Operate for the Extractive Sector.” The tries to Local Development: The Case of Oil Com- Extractive Industries and Society 1 (1): 7–11. panies in Nigeria.” Working Paper 1109, ESSEC Research Center, Cergy. This paper focuses on social responsibility in the extractive industries. It argues that an approach in Extractive industries face two main challenges of which companies are encouraged to focus on social corporate social responsibility and poverty reduction: responsibility can prompt priorities and behaviors (1) they need to recognize that societal activity is part that blur appropriate boundaries between firms, of their core business and; (2) they need to take part in governments, and communities. This may lead to socioeconomic projects that contribute to their stake- unintended consequences that ultimately result in holders’ empowerment and not only to their living poorer community outcomes, and hence dilution of conditions. Based on surveys in Nigeria in 2008, the the “social license” that firms are eagerly seeking. An paper presents two societal performance indices: the argument is made for limiting social development Poverty Exit Index (PEI) and the Relational Capabil- ”outreach” and focusing more on “in-reach,” in which ity Index (RCI). It shows that, while extractives have extractive companies prioritize activities aimed at fostered the PEI of the local communities, the devel- behavioral (and consequently, attitudinal) change opment projects of the oil companies had a negative across the whole of their organization to secure trust impact on their RCI. Key variables are identified that and support from host communities. can have a positive influence on the RCI and on which a sensible development policy should focus. ■■ http://www.sciencedirect.com/science/article/pii/ S2214790X13000038 ■■ http://hal-essec.archives-ouvertes.fr/ docs/00/62/62/47/PDF/WP1109.pdf 37  Flagship Seminars | RECOMMENDED READING Making Extractive Industries’ Wealth Work for the Poor Mayorga, Eleodoro Alba. 2009. Sheldon, Christopher Gilbert, Alonso “Extractive Industries Value Chain: A Comprehen- Zarzar Casis, Georg Caspary, Verena sive Integrated Approach to Developing Extractive Seiler, and Fernando Ruiz Mier. 2013. Industries.” Africa Region Working Paper Series Innovative Approaches for Multi-Stakeholder Engage- 125, World Bank, Washington. ment in the Extractive Industries. Extractive indus- tries for Development Series 29. Washington: Proper stewardship of revenues from the oil, gas, and World Bank. mining industries has tremendous potential to lift people out of poverty and contribute to sustainable Extractive industries can generate significant wealth development. These industries create jobs and transfer for developing countries and serve as catalysts for technologies and knowledge. The extractive industries growth. They generate large revenues through roy- sector is known for generating high economic rents. alties, taxation, and exports. They also create jobs. In Indeed, the difference between the value and cost of some cases, however, resource wealth is associated with production and the government’s share of this rent can political turmoil, deteriorating standards of living, civil be very large in times of high commodity prices, as in conflict, and elite capture. The management’s response the last several years. This paper outlines an approach, to the Extractive Industries Review signaled a critical based on the Extractive Industries Transparency Ini- turning point in the World Bank Group’s engage- tiative, by which resource-rich countries can maximize ment in the sector, which had focused on exploration development gains from exploitation of their oil, gas, and development activities, sector policy reform, and and mineral resources. commercialization of state-owned enterprises. This ■■ http://siteresources.worldbank.org/INTOGMC/ publication presents four case studies, highlighting Resources/ei_for_development_3.pdf issues of scalability, replicability, innovation, and level of multistakeholder collaboration. ■■ http://www-wds.worldbank.org/external/default/ Ramdoo, Isabelle, and San Bilal. 2014. WDSContentServer/WDSP/IB/2013/08/01/00035 “Extractive Resources for Development: Trade, 6161_20130801150122/Rendered/PDF/798930N- Fiscal and Industrial Considerations.” Discussion WP002900Box0379795B00PUBLIC0.pdf Paper 156, European Centre for Development Policy Management, Siege. Short, Clare. 2014. For Africa, the capacity to mobilize domestic rev- “The Development of the Extractive Industries enue and to stimulate industrial development from Transparency Initiative.” Journal of World Energy extractive resources is viewed as essential to economic Law and Business 7 (1): 1–8. priorities. ■■ http://ecdpm.org/wp-content/uploads/ Transparency in the extractive industries is becoming DP-156-Extractive-Resources-for-Develop- the norm. The Extractive Industries Transparency Ini- ment-2014.pdf tiative (EITI) has played a leading role in mobilizing governments, industry, and civil society in advancing this agenda. This paper reflects on the development of the EITI and explores its potential to contribute to national debates about the management of the extractive industries. The work by the Nigerian EITI is an example of how information about the revenue flows from the sector can help stimulate debate and reform. As the EITI grows, there is a need to strength- en standards and provide incentives for innovation. A challenge remains: how to harness transparency to promote accountability. ■■ http://eiti.org/files/The-development-of-the-EI- TI-Clare-Short.pdf 38  Flagship Seminars | RECOMMENDED READING Making Extractive Industries’ Wealth Work for the Poor Van Alstine, James, and Ralf Barkemeyer. 2014. “Business and Development: Changing Discourses in the Extractive Industries.” Resources Policy 40 (6):4–16. This paper analyzes development agency policy doc- uments and corporate reports to identify converging and diverging discourses and changing “institutional logics” by key actors in extractive industries. For ex- ample, attempts by the United Nations Development Programme and other international organizations to manage the outcomes of market-driven develop- ment in extractive industries have given rise to a logic seeking good governance, while a parallel “logic” of partnership for development drives that of the private companies in the extractive industries sector. These coinciding trends may lead to fragmentation in the sector, or prompt a move toward greater convergence and restructuring. ■■ http://www.sciencedirect.com/science/article/pii/ S0301420714000075 39  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar PUBLIC DEBT, PUBLIC INVESTMENT, AND GROWTH Sponsored by the IMF’s Fiscal Affairs Department and Research Department T he global financial crisis has left a legacy of very high public debt across advanced economies, which has elicited calls to gradually decrease public debt to reduce risks of sovereign debt crises and to reestablish buffers. Public infrastructure in many countries has also deteriorated and consequently affected growth trajectories, prompting calls for scaling up public investment, given the still very low real costs of public borrowing. Some key questions for discussion in this session include the following: First, is a further debt buildup warranted to meet public investment goals? How can the efficiency of public investment be improved? Second, Is the legacy of high public debt a problem, or should countries simply live with higher public debt in the future? Third, what normative guidelines are appropriate for countries as they try to manage the multiple challenges associated with high public debt, deficient public infrastructure, and lackluster medium-term growth prospects? 40  Flagship Seminars | RECOMMENDED READING Public Debt, Public Investment, and Growth Arslanalp, Serkan, Fabian Bornhorst, San- Dabla-Norris, Era, Jim Brumby, Annette jeev Gupta, and Elsa Sze. 2010. Kyobe, Zac Mills, and Chris Papageorgiou. “Public Capital and Growth.” Working Paper 2012. 10/175, International Monetary Fund, Washington. “Investing in Public Investment: An Index of Public Investment Efficiency.” Journal of Economic Growth This paper estimates the impact of public capital on 17(3): 235–66. economic growth for 48 Organisation for Economic Co-operation and Development (OECD) and non- Pritchett (Journal of Economic Growth 5: 361–84, 2000) OECD countries during 1960–2001. Using the produc- convincingly argues that the difference between invest- tion function and its extensions, it finds a positive—but ment cost and capital value is of first-order empirical concave—elasticity of output with respect to public importance, especially for developing countries where capital, which is robust to changes in time intervals and public investment is the primary source of investment. varying depreciation rates. Furthermore, in non-OECD This paper constructs a public investment efficiency countries the growth impact of public capital is higher index that captures the institutional environment once longer time intervals are considered. underpinning public investment management across ■■ http://www.elibrary.imf.org/view/IMF001/11178- four different stages: project appraisal, selection, im- 9781455201860/11178-9781455201860/11178- plementation, and evaluation. Covering 71 countries, 9781455201860_A001.xml including 40 low-income countries, the index allows for benchmarking across regions and country groups and for nuanced policy-relevant analysis and identifi- Berg, Andrew G., and Jonathan D. Ostry. cation of specific areas where reform efforts could be 2011. prioritized. Research applications are outlined. “Equality and Efficiency.” Finance & Development 48 ■■ http://link.springer.com/article/10.1007/s10887- (3): 12–15. 012-9078-5 ■■ http://www.imf.org/external/pubs/ft/ fandd/2011/09/berg.htm Gupta, Sanjeev, Alvar Kangur, Chris Papa- georgiou, and Abdoul Wane. 2014. Bom, Pedro R.D., and Jenny Ligthart. “Efficiency-Adjusted Public Capital and Growth.” 2008. World Development 57: 164–78. “How Productive Is Public Capital? A Meta-Analy- This paper constructs an efficiency-adjusted public sis.” Working Paper 2206, CESifo, Munich. capital stock series and reexamines the public capital and growth relationship. The paper also examines the The paper analyzes the contribution of public cap- effects of four specific stages of the public investment ital to private output using several meta-analytical process—appraisal, selection, implementation, and techniques. Both fixed and random effects models are evaluation—on capital accumulation and growth. estimated by weighted least squares. Sample overlap The results show that public capital is a significant across studies is explicitly controlled for by employ- contributor to economic growth. The quality of public ing a “full” generalized least squares estimator. The investment, as measured by variables capturing the weighted average output elasticity of public capital adequacy of project selection and implementation, amounts to 0.08 after correcting for publication bias. is statistically significant in explaining variations in A substantial part of the heterogeneity across studies is economic growth, a result mainly driven by low-in- explained by study design parameters, such as econo- come countries. metric specification, estimation technique, empirical model, type of public capital, and level of aggregation ■■ http://dx.doi.org/10.1016/j.worlddev.2013.11.012 of public capital data. ■■ http://www.cesifo-group.de/DocDL/cesifo1_ wp2206.pdf 41  Flagship Seminars | RECOMMENDED READING Public Debt, Public Investment, and Growth Gupta, Sanjeev, Michael Keen, Benedict International Monetary Fund. 2014. Clements, Victoria Perry, David Coady, “Time for an Infrastructure Push? The Macroeco- Ruud De Mooij, Stefania Fabrizio, and nomic Effects of Public Investment.” In World Eco- others. 2014. nomic Outlook: Legacies, Clouds, Uncertainties, 75-114. “Fiscal Policy and Income Inequality.” Policy Paper, Washington: International Monetary Fund. International Monetary Fund, Washington. Fiscal policy is the primary tool for governments to Krugman, Paul. 2014. affect income distribution. Rising income inequality in advanced economies and developing countries has “Redistribution and the Lesser Depression.” The Con- coincided with growing public support for income re- science of a Liberal (blog), New York Times, March 8. distribution. This comes at a time when fiscal restraint ■■ http://krugman.blogs.nytimes.com/2014/03/08/ is an important priority in many advanced economies redistribution-and-the-lesser-depression/?_ and developing countries. In the context of the IMF’s php=true&_type=blogs&_r=0 mandate to promote growth and stability, this paper describes (1) recent trends in the inequality of income, wealth, and opportunity in advanced economies and Ostry, Jonathan. 2014. developing countries; (2) country experience with dif- “We Do Not Have to Live with the Scourge of In- ferent fiscal instruments for redistribution; (3) options equality.” Financial Times, March 3. for the reform of expenditure and tax policies to help achieve distributive objectives in an efficient manner ■■ http://www.ft.com/intl/cms/s/0/f551b3b0-a0b0- that is consistent with fiscal sustainability; and (4) 11e3-a72c-00144feab7de.html#axzz39WrGs1cn recent evidence on how fiscal policy measures can be designed to mitigate the impact of fiscal consolidation Ostry, Jonathan D., and Andrew G. Berg. on inequality. 2014. ■■ http://www.imf.org/external/np/pp/ “Measure to Measure: Inequality May Be a Hot eng/2014/012314.pdf Topic, but Describing It Is a Difficult Proposition.” Finance & Development 51 (3): 35–38. International Monetary Fund. 2014. ■■ http://www.imf.org/external/pubs/ft/ Fiscal Monitor: Public Expenditure Reform—Making fandd/2014/09/ostry.htm Difficult Choices. Washington, April. The global fiscal outlook has strengthened from late Ostry, Jonathan D., and Andrew Berg. 2013, but repairing the public finances remains a 2014. priority. Recent policy moves in advanced economies “Treating Inequality with Redistribution: Is the have reduced near-term risks, but medium-term pros- Cure Worse Than the Disease?” iMFdirect (blog), pects are still uncertain and debt remains at historic February 26. highs. Fiscal vulnerabilities are rising in both emerging market economies and low-income countries, although ■■ http://blog-imfdirect.imf.org/2014/02/26/treat- in most cases from relatively moderate levels. In most ing-inequality-with-redistribution-is-the-cure- advanced economies, the pace of fiscal consolidation worse-than-the-disease/ will slow in 2014 as average gross debt stabilizes and the focus appropriately shifts toward ensuring that the composition of adjustment supports the still-fragile recovery. ■■ http://www.elibrary.imf.org/view/IMF089/20956- 9781475557121/20956-9781475557121/20956- 9781475557121.xml?rskey=Id7GeC&result=1 42  Flagship Seminars | RECOMMENDED READING Public Debt, Public Investment, and Growth Ostry, Jonathan David, Andrew Berg, and Oxfam International. 2014. Charalambos G. Tsangarides. 2014. “Challenge to World Bank and IMF to Get Serious “Redistribution, Inequality, and Growth.” Staff Dis- about Extreme Inequality.” Press release, April 9. cussion Note 14/02, International Monetary Fund, Washington. ■■ http://www.oxfam.org/en/pressroom/pressreleas- es/2014-04-09/challenge-world-bank-and-imf- The IMF has recognized in recent years that one can- get-serious-about-extreme-inequality not separate issues of economic growth and stability on the one hand and equality on the other. Indeed, there Porter, Eduardo. 2014. is a strong case for considering inequality and an in- ability to sustain economic growth as two sides of the “In New Tack, I.M.F. Aims at Income Inequality.” same coin. Central to the IMF’s mandate is providing New York Times, April 8. advice that will enable members’ economies to grow ■■ http://www.nytimes.com/2014/04/09/business/ on a sustained basis. But the IMF has rightly been economy/in-new-tack-imf-aims-at-income-in- cautious about recommending the use of redistributive equality.html?module=Search&mabReward=relbia policies given that such policies may themselves under- s%3Ar%2C%7B%221%22%3A%22RI%3A7%22% cut economic efficiency and the prospects for sustained 7D&_r=0 growth (the so-called leaky bucket hypothesis written about by the famous Yale economist Arthur Okun in the 1970s). ■■ http://www.elibrary.imf.org/view/IMF006/21122- 9781484352076/21122-9781484352076/21122- 9781484352076.xml?rskey=eNJ0Tg&result=2 43  Flagship Seminars | RECOMMENDED READING 2014 Flagship Seminar TRANSFORMING WORLD TRADE: Global Value Chains and Development Sponsored by the World Bank Group Trade and Competitiveness Global Practice T he global economy has been transformed by changes in trade and investment. Business processes that once took place only within national borders have been broken down into ever-smaller components, spread across many countries in the form of Global Value Chains (GVCs). GVCs offer developing countries the potential to grow faster, import skills and technology, and boost employment and productivity. Opening borders and attracting investment are important, but governments must also invest in education, boost infrastructure connectivity, and set the right labor market policies. Panelists will discuss these issues from the perspective of multilateral organizations, the private sector, and individual, developing-country governments. 44  Flagship Seminars | RECOMMENDED READING Transforming World Trade: Global Value Chains and Development Arvis, Jean-François, Daniel Saslavsky, Cattaneo, Olivier, Gary Gereffi, and Lauri Ojala, Ben Shepherd, Christina Bus- Cornelia Staritz, eds. 2010. ch, and Anasuya Raj. 2014. Global Value Chains in a Postcrisis World: A Develop- Connecting to Compete 2014: Trade Logistics in the ment Perspective. Washington: World Bank. Global Economy—The Logistics Performance Index and Its Indicators. Washington: World Bank. The world is in the midst of a sporadic and painful recovery from the most severe economic crisis since This is the fourth edition of Connecting to Compete: the Great Depression in the 1930s. The unprecedented Trade Logistics in the Global Economy. It features the scale of the crisis and the speed of its transmission logistics performance index (LPI) based on a world- have revealed the interdependence of the global econo- wide survey of global freight forwarders and express my and the increasing reliance by businesses on global carriers. The LPI is a benchmarking tool developed by value chains. These chains represent the process of the World Bank that measures performance along the ever-finer specialization and geographic fragmentation logistics supply chain within a country. It allows lead- of production, with the more labor-intensive portions ers in government, business, and civil society to better transferred to developing countries. As the recovery assess the competitive advantage created by good unfolds, it is time to take stock of the aftereffects and logistics and to understand the relative importance of to draw lessons for the future. different interventions. ■■ http://documents.worldbank.org/curated/ ■■ http://lpi.worldbank.org/sites/default/files/LPI_ en/2010/01/12833926/global-value-chains-post- Report_2014.pdf crisis-world-development-perspective Asian Development Bank and World Trade Cattaneo, Oliver, Gary Gereffi, Sebastien Organization. 2013. Miroudot, and Daria Taglioni. 2013. Aid for Trade in Asia and the Pacific: Driving Private “Joining, Upgrading and Being Competitive in Sector Participation in Global Value Chains. Manila: Global Value Chains: A Strategic Framework.” Asian Development Bank. Policy Research Working Paper 6406, World Bank Washington. This study analyzes the overall context in which aid for trade can facilitate development. Based on experiences Global value chains have played an increasing role in from Asia and the Pacific, where aid for trade has sup- business strategies, profoundly affecting international ported key trade-related investments, it expands on the trade and development paradigms. Global value chains regional production component of Asia’s impressive now represent a major source of opportunities for so- trade-led growth. It highlights the specific role value cial upgrading and a new path for development. Trade, chains play in promoting the assimilation of Asia’s de- competitiveness, and development policies should veloping countries into dynamic production networks be reshaped accordingly to seize these opportunities that can thereby promote growth. The content is based and avoid the risks. This paper provides a framework on discussions at several meetings of the Regional and analytical tools for measuring and improving a Technical Group on Aid for Trade for Asia and the country’s performance with respect to participation in Pacific and takes into account external consultations at global value chains. It provides guidance for countries the World Trade Organization and other forums. willing to join, maintain participation in, or move up ■■ http://www.adb.org/sites/default/files/pub/2013/ global value chains. In pursuit of the ultimate objective aid-for-trade-asia-and-the-pacific.pdf of increasing the value (the development content) of trade, it also offers strategies for maximizing the ben- efits and minimizing the risks of developing countries’ participation in global value chains. ■■ http://documents.worldbank.org/curated/ en/2013/04/17558147/joining-upgrading-be- ing-competitive-global-value-chains-strate- gic-framework 45  Flagship Seminars | RECOMMENDED READING Transforming World Trade: Global Value Chains and Development Center on Globalization, Governance & to local firms and workers—that is perhaps its most Competitiveness. 2014. valuable input to long-term growth and development. Underpinned by substantial research and analytical “Global Value Chains & Development.” Website. work, this volume sets out the implications for policy- The Global Value Chains Initiative provides an makers hoping to harness the power of FDI for greater industry-centric view of economic globalization development outcomes. that highlights the linkages between firms and other ■■ http://documents.worldbank.org/curated/ economic actors from the global to the local levels en/2013/12/18680570/making-foreign-direct-in- of analysis. The initiative seeks to disseminate recent vestment-work-sub-saharan-africa-local-spill- developments and applications of this research agenda overs-competitiveness-global-value-chains and to foster the development of an international community of global value chain researchers using the tools provided by the Internet. The site links to various Gereffi, Gary. 2014. organizational, regional, country, and industry-specific “Global Value Chains in a Post–Washington report collections focusing on global value chains. Consensus World.” Review of International Political ■■ http://www.cggc.duke.edu/projects/gvc.php Economy 21 (1): 9–37. Contemporary globalization has been marked by European Centre for Development Policy significant shifts in the organization and governance Management. 2014. of global industries. In the 1970s and 1980s, one such shift was characterized by the emergence of buy- “Value Chains and Industrialisation.” Governance, er-driven and producer-driven commodity chains. In Regional integration, Economics, Agriculture and Trade the early 2000s, a more differentiated typology of gov- (GREAT) Insights 3 (5): 2–31. ernance structures was introduced, which focused on This issue of GREAT Insights brings together a num- new types of coordination in global value chains. To- ber of key insights on the dynamics of moving toward day the organization of the global economy is entering better integration into regional and global value chains, another phase, with transformations that are reshaping focusing on a range of opportunities, challenges, and the governance structures of both global value chains policy recommendations. Although these remain and global capitalism at various levels. country and context specific, the balance between ■■ http://www.tandfonline.com/doi/abs/10.1080/096 unleashing market forces and harnessing them to sus- 92290.2012.756414 tainable and inclusive development objectives stands as a critical concern for all stakeholders. Gereffi, Gary, and Xubei Luo. 2014. ■■ http://ecdpm.org/wp-content/uploads/Great_ vol3_issue5_Value_Chains_industrialisation_ “Risks and Opportunities of Participation in Global may_2014.pdf Value Chains.” VoxEU website of the Centre for Economic Policy Research. Farole, Thomas, and Deborah Winkler, The explosion of trade in intermediate goods has eds. 2013. created new development opportunities, but many of the jobs at the bottom of global value chains are low Making Foreign Direct Investment Work for paid, insecure, and dangerous. This column argues that Sub-Saharan Africa: Local Spillovers and participation in global value chains brings risks as well Competitiveness in Global Value Chains. Washington: as opportunities. The gains from “moving up the global World Bank Group. value chain” are not equally distributed—large, profes- Foreign direct investment (FDI) is becoming an sional, high-tech firms with diversified export markets, increasingly significant catalyst for output and trade in and high-skilled workers with formalized contracts developing countries, in part due to a major expan- benefit the most. sion in the scope of global value chains. FDI delivers ■■ http://www.voxeu.org/article/global-val- a number of important contributions to economic ue-chain-participation-risks-and-opportunities development in investment, employment, and foreign exchange. However, it is FDI’s spillover potential— the productivity gain resulting from the diffusion of knowledge and technology from foreign investors 46  Flagship Seminars | RECOMMENDED READING Transforming World Trade: Global Value Chains and Development Park, Albert, Gaurav Nayyar, and Patrick Saito, Mika, Michele Ruta, and Jarkko Low. 2013. Turunen. 2013. Supply Chain Perspectives and Issues: A Literature Trade Interconnectedness: The World with Global Value Review. Geneva: World Trade Organization; Hong Chains. Washington: International Monetary Fund. Kong SAR, China: Fung Global Institute. Global value chains are creating more and more of Global value chains have become ubiquitous. The lit- world income, including labor income. This is by no erature that attempts to understand and explain global means limited to manufacturing; indeed, more income value chains is vast, multidisciplinary, and no less is generated by exporting services within global value complex than the phenomenon itself. This volume is an chains. Moreover, the fragmentation of the production ambitious attempt at a fairly comprehensive review of process across different countries has led to a strong literature on the subject. trade-investment nexus. Analyzing the role of global ■■ http://www.wto.org/english/res_e/booksp_e/ value chains is now feasible given the improvement aid4tradesupplychain13_e.pdf in value-added trade data supported by a number of international organizations. ■■ http://www.imf.org/external/np/pp/ Saez, Sebastian, Daria Taglioni, Erik Van eng/2013/082613.pdf der Marel, Claire H. Hollweg, and Veroni- ka Zavacka. Forthcoming, Fall 2014. Valuing Services in Trade: A Toolkit for Competitive- Staritz, Cornelia. 2010. ness Diagnostics. Washington: World Bank. Making the Cut? Low-Income Countries and the Glob- al Clothing Value Chain in a Post-Quota and Post-Cri- The Service Trade Competitiveness Diagnostic Toolkit sis World. Washington: World Bank. is part of a larger agenda of trade competitiveness work developed by the World Bank’s International The clothing sector has traditionally been a gateway to Trade Unit. Services are a key input in countries’ trade export diversification and industrial development for competitiveness, as well as a new source of trade diver- low-income countries, but recent developments may sification, making it critical to understand what factors condition this role. In most advanced economies and and main constraints matter most for services compet- middle-income countries, the clothing sector was cen- itiveness. The toolkit provides a framework, guidelines, tral in the industrialization process. Changes in global and set of practical tools for conducting a thorough supply and demand structures have increased com- analysis and diagnostic of trade competitiveness in the petition between low-income country exporters but services sector using a methodology that sheds light on also offer new opportunities in fast-growing emerging a country’s ability to both export services and improve markets. The second half of the twentieth century was its export performance through policy change. characterized by rising demand for clothing and the replacement of advanced economies’ domestic pro- duction by imports from developing countries. Today, however, demand has stagnated, and import penetra- tion levels are close to 100 percent in most advanced economies. Thus, the growth of clothing exports from a few developing countries largely comes at the expense of clothing producers in other developing countries. ■■ http://documents.worldbank.org/curated/ en/2011/01/13362258/making-cut-low-income- countries-global-clothing-value-chain-post-quota- post-crisis-world 47  Flagship Seminars | RECOMMENDED READING Transforming World Trade: Global Value Chains and Development Staritz, Cornelia, and José Guilherme World Economic Forum. 2013. Reis, eds. 2013. Enabling Trade: Valuing Growth Opportunities. In Global Value Chains, Economic Upgrading, and Gender: collaboration with Bain & Company and the World Case Studies of the Horticulture, Tourism, and Call Bank. Geneva: World Economic Forum. Center Industries. Washington: World Bank. This report examines supply chain barriers to inter- This book provides a gendered analysis of the horti- national trade and concludes that they are far more culture, tourism, and call center global value chains. significant impediments to trade than are tariffs. The It is based on case studies carried out in Honduras, report combines empirical macroeconomic analysis Kenya, and Egypt. The focus is on export sectors that with a series of in-depth case studies on individual have been characterized by high female employment companies and industries. This ground-level under- and that have been relatively underexplored from the standing informs a general set of lessons relevant angle of trade and gender research. The case studies to governments and companies as they attempt to show that global value chains and economic upgrading promote trade and economic growth. The authors of dynamics have important gender dimensions and that the report offer specific policy recommendations with integration and economic upgrading both influence the lessons in mind. and are influenced by gender relations. ■■ http://www.weforum.org/reports/en- ■■ http://documents.worldbank.org/curated/ abling-trade-valuing-growth-opportunities en/2013/01/18621419/global-value-chains-eco- nomic-upgrading-gender-case-studies-horticul- ture-tourism-call-center-industries Taglioni, Daria, and Deborah Winkler. 2014. “Making Global Value Chains Work for Develop- ment.” Economic Premise 143, World Bank, Wash- ington. Global value chains are playing an increasingly im- portant role in business strategies, which has pro- foundly changed international trade and development paradigms. Global value chains now represent a new path for development by helping developing countries accelerate industrialization and the “servicification” of the economy. Global value chains can create new opportunities on the labor demand side, but supply and demand cannot meet if the supply is missing. This potential gap illustrates the importance of embedding national global value chain policies into a broader portfolio of policies aimed at upgrading skills and physical and regulatory infrastructure, and enhancing social cohesion. ■■ http://documents.worldbank.org/curated/ en/2014/05/19517206/making-global-val- ue-chains-work-development 48  Flagship Seminars | RECOMMENDED READING MEDIA PARTNERS ™ ™ 49  Flagship Seminars | RECOMMENDED READING