Tax incentives for foreign direct investment part I : Recent trends and countertrends

According to the conventional wisdom, tax incentives for investment - in particular for foreign direct investment (FDI) - are not recommended. That is the view held almost universally by theorists and by the international bodies that advise on tax matters.' Tax incentives are bad in theory and bad in practice. They are bad in theory principally because they cause distortions: investment decisions are made that would not have been made without the inducement of special tax concessions. They are bad in practice, being both ineffective and inefficient. They are ineffective in that tax considerations are only rarely a major determinant in FDI decisions; they are inefficient because their cost, in terms of tax revenue foregone, often far exceeds any benefits they may produce. Other criticisms are also frequently levelled against tax incentives for FDI - they are inequitable (since they benefit some investors but not others), they are difficult to administer and open to abuse, and they lack transparency. Thus, it is not surprising that ''the standard advice given by institutions like the World Bank and the lMF to developing countries is to refrain from offering tax incentives to foreign investors".2 The purpose of this article is not to question that advice or to challenge the conventional wisdom - except in one respect. Recent evidence does suggest that tax considerations are an increasingly important factor in investment decisions and that special tax incentives have become substantially more effective as instruments for attracting FDI than they were 10 or 20 years ago.3 The first part of this article, published here, examines some of that evidence, reviews some recent trends in national policies towards FDI, attempts to suggest why investment incentives have become more important and more effective, and looks at the pressures that are exerted on governments, especially in developing countries, to compete for FDI by offering special incentives. The second part of the article, to be published in the Bulletin next month, assumes that many countries will continue to offer tax incentives to investors regardless of the best advice, and considers how incentives might be designed in order to increase their effectiveness and efficiency.

How transnational environmental advocacy networks socialize international financial institutions: a case study of the international finance corporation

Environmental organizations, characterized here as transnational advocacy networks, use various strategies to "green" international financial institutions (IFIs). This article goes beyond analyzing network strategies to examine how transnational advocacy networks reconstitute the identity of IFIs. This, it is argued, results from processes of socialization: social influence, persuasion and coercion by lobbying. A case study of the International Finance Corporation (IFC), as a member of the World Bank Group, is used to analyze how an IFI internalized sustainable development norms. The IFC finances private enterprise in developing countries by providing venture capital for private projects. Transnational advocacy networks socialized the IFC through influencing its projects, policies and institutions via direct and indirect interactions to the point where the organization now sees itself as a sustainable development financier. This article applies constructivist insights to the greening process in order to demonstrate how socialization can reshape an IFI's identity.

The development impact of remittances to Nicaragua

Workers' remittances represent a resource flow from rich to poor countries. The global value of remittances has risen sharply to over US$100 billion a year. This represents the second largest external income source for developing countries behind foreign direct investment (FDI), and far outstrips official development assistance (ODA) (Orozco 2003a). Remittances to developing countries are becoming increasingly important as other sources of external income decline. The impact of remittances on development, however, is inadequately reflected in the literature. Latin America and the Caribbean (LAC) is the world's largest remittance-receiving region. With 9 per cent of the world's population, the region receives approximately 32 per cent of the world's remittances. It is appreciably greater than tourist revenues in many countries, and in five countries in this region, remittances account for over 10 per cent of GNP (World Bank 2003). Within LAC, Nicaragua stands out from other countries. While the US dollar value of remittances to Nicaragua, estimated at US$610 million in 2001, is quite modest compared with the US$10 billion flowing into Mexico, for example, the relative volume of this resource compared with other income flows, and the potential for the country's development, makes Nicaragua's case exceptional. Representing almost 24 per cent of its GNP, remittances to Nicaragua have a significant social and economic impact. The value of known remittances is greater than total export earnings, on a par with the country's ODA, and almost five times that of FDI. As such, remittances currently represent the second largest single resource flow into the country. This is a recent phenomenon.

The role of schools in the enhancement of social tolerance and cohesion: a case study research project in the Pacific region

It is generally assumed that education will be good for a country and its inhabitants. But if the educational experience does not support those aspects of a culture the inhabitants believe to be most important, it does not contribute to social cohesion. Societies adjusting to 'modern' forces, question the 'benefits' of education, when they have poorly-funded, centralised education systems, uneven access to schooling, and where student progress is determined by academic exams and post-school employment options are few. In such circumstances, citizens are uncertain how to use education to cohere their culture and society.

This World Bank funded consultancy project sought the views of citizens of the Solomon Islands and Vanuatu on the role of schools in maintaining culture and in promoting social tolerance and harmony. Researchers also developed an educational framework for promoting social cohesion and democratic participation in schools in the Pacific region.

This presentation will consider :

* The context of the study in the Pacific region
* Research and the World bank
* Issues associated with case study research
* Case study findings
* The educational framework developed.

Implementing FATF standards in developing countries and financial inclusion : findings and guidelines

This report, emanating from a project commissioned by the FIRST Initiative, considers the impact of the implementation of Anti-Money Laundering (AML) and Combating the Financing of Terrorism (CFT) controls on financial inclusion in five countries (Indonesia, Kenya, Mexico, Pakistan and South Africa). Based on these findings, it develops a set of guidelines to assist the authorities in developing countries to design effective AML/CFT regimes that are compliant with Financial Action Task Force (FATF) standards and supports financial inclusion.
The report and guidelines will be of benefit to countries striving towards the dual goals of protecting their institutions against money laundering and the financing of terrorism as well as extending financial inclusion, irrespective of whether protective measures are being considered in the process of implementing or amending AML/CFT controls to meet the Forty Nine Recommendations of the FATF or in order to meet other, related international requirements, such as those set out in the 2000 United Nations Convention on Transnational Organised Crime or the 2003 United Nations Convention Against Corruption.
The project was supervised and guided by a steering committee consisting of representatives from the FIRST Management Unit, World Bank, International Monetary Fund (IMF), the UK’s Department for International Development (DFID), the Consultative Group to Assist the Poor (CGAP), the South African National Treasury, the FinMark Trust and Professor Nikos Passas, an acknowledged world expert on AML/CFT standards and implementation.

Where do entrepreneurs have the best chances of success? The Asia-Pacific regulatory environment for entrepreneurial Micro And Medium Sized Enterprises (MMES)

Why do some entrepreneurs succeed while others fail in international competition? Perhaps it is better to turn the question around and ask, why is it that a particular country or economy becomes the home base for competitive globally-oriented entrepreneurs? What makes Australia a global leader in wine exports? How did New Zealand make it to global ranks in the creative industries? Why does Singapore have the most businessfriendly environment for entrepreneurs? Why is it “location, location, location”? One of the most powerful factors is the regulatory environment.

Asia-Pacific country-specific and region-specific regulations are diverse, and they seriously affect the climate for start-up entrepreneurs. They range from best-in-the world (e.g. Australia, New Zealand and Singapore) to the dreadful (Indonesia), according to the World Bank. Costs and profits can be affected as much by a government regulation as by a management decision. Fundamental entrepreneurial decisions--such as which lines of business to go into, which products and services to produce and introduce, which investments to finance, how and where to make goods and how to market them, and what prices to charge--are increasingly subject to governmental control.

In this short paper, we examine World Bank and Transparency International data on Asia-Pacific regulatory environments and make statements about how the economies compare to best practice. While I use data collected by other sources, I believe the added value comes through comparing and contrast the regulatory environments of our region in a justifiable and easily understood manner.

Levy grant training scheme evolution : focus on Fiji and Singapore

This thesis examines the evolution of national training policy in Fiji since 1973 with a particular emphasis on the national levy-grant scheme that was introduced in Fiji in that same year. Developments in the Fiji National Training Council (FNTC) levy-grants scheme since its inception, including substantive amendments to the legislation in late 2002, form part of the scholarship. The thesis will provide an analytical narration of the training policy objectives and their transformation over a time span of almost three decades in the context of a small island nation. To inform this study, it was considered essential to compare the Fiji experience of levy grants schemes with other levy grants scheme. The author decided to use as the focal comparative benchmark the case of the Skills Development Fund (SDF) in Singapore. The SDF has been increasingly portrayed, by the World Bank, the International Labour Organisation and other influential agencies, as the best practice case when it comes to managing a training levy grants scheme. The thesis adopted a qualitative approach that utilized elements of case study, historical research, and key person interviews. The challenges of doing 'insider* research were explored because of its pertinence to the study. Because the study also involved the comparison of the policy experiences of two distinct countries, it was imperative to consider the issues and challenges of undertaking comparative research with particular reference to training matters- Given that training is often enmeshed with other human resources management issues, cognisance was taken of some of the broader debates in this regard. Following consideration of the methodological issues, the research paper explores the objectives of national training strategies and, in particular, issues relating to national competitiveness and skills development. The purpose is to situate the issue of training and skills development within the broader discourse of national development. Alternative approaches to the strategic role of training are considered both at the national and organisational level and some of the classic and current debates surrounding human capital investment are visited. The thesis then proceeds to examine the forms of, and rationale for government interventions in the area of training. One of the challenges both in practice and theoretically is to arrive at a consensual definition of training because of the constantly evolving context and boundaries in which training policies are fashioned. This provides the setting to examine the role that governments can and do play in skills development and how levy-grant schemes, in particular, contribute to the process. Three forms of levy grants schemes are identified and examined: levy-generating; levy-exemption; and levy-grant and reimbursement schemes. The levy-grant and reimbursement variant is the basic thrust of this thesis. In this regard, the UK experience with the levy-grant system from 1964 to 1981 is also reviewed. Some of the issues in relation to training levies are scrutinized including the levy as a sheltered source of training finance, levy rates, duration of levy, impact of levy on the quality and quantity of training, benefits to small businesses, links between training and strategic business objectives, repackaging of training to qualify for grants, and the process by which training levy policies are devised. In looking at the policy formulation, it was necessary to unpack the processes involved and explore the role of the state further. In relation to policy development and implementation, the consultation processes, role of bureaucrats, the policy context, and approaches to policy transfer are examined. In looking at the role of the state in policy development, the alternative roles of government are explored and the concepts of the 'developmental state' and the 'corporatist state* evaluated. The notion of the developmental state has particular relevance to this study given the emphasis placed by the Singaporean government on human resource development policies. This sets the scene for a detailed examination of the role of levy-grant training schemes in Fiji and Singapore. The Skills Development Fund in Singapore was developed as an integral component of national economic policy when the Singaporean government decided to break out of the 'low-skills' trap and move the economy towards a higher value adding structure. The levy-grant system was designed to complement the strategy by focusing on upgrading the skills of employees on lower incomes, the assumption being that employees on lower remuneration were more likely to need skills upgrading. The study notes that the early objectives of the SDF were displaced when it was revealed that the bulk of SDF expenditure was directed at higher level supervisory and management training. As a result, the SDF had to refocus its activities on small and medium enterprises and the workers who were likely to miss out on formal training opportunities. The Singaporean context also shows trade unions playing a significant role in worker education and literacy programmes financed under the SDF. To understand this requires some understanding of the historical linkages between the present Singaporean government and trade union leadership. Another aspect of the development of the SDF has been the constant shifting of the institutional responsibility for the scheme. As late as September 2003, the SDF was again moved, this time to the newly created Singapore Workforce Development Agency, with the focus turning to lifelong learning and assisting Singaporeans who are unemployed or made redundant as a result of the economic restructuring. The Fiji experience with the FNTC scheme is different. It evolved in the context of perceived skills shortages but there was a degree of ambiguity over its objectives. There were no specific linkages with economic policy. Relationships with other public training institutions and more recently, private training providers, have been fraught with difficulties. The study examines the origins of the policy, the early difficulties including perceived employer grievances, and the numerous external assessments of the Fiji levy-grant scheme noting that some of them were highly critical. The thesis also examines an attempted reform of the scheme in 1992-93 that proved unsuccessful and the more recent legislative reforms to the scheme in 2002 that have expanded the role of the scheme to encompass, inter alia, national occupational standards and accreditation activities. The thesis concludes by comparing the two schemes noting that the SDF is well entrenched as a policy instrument in Singapore whilst the FNTC is facing a struggle to assert its legitimacy in Fiji.

Healthy markets - healthy people/ : reforming health care in Cambodia

Health care reform has been described as a global epidemic. This thesis deals with nature and experience of health care reform in developing countries. Increasing privatisation, economic transition, and structural adjustment have provided the context for health system changes. Different approaches to reform have been developed by international organisations such as the World Bank, WHO and UNICEF. What has driven national health care reforms? Are such policies really appropriate to developing countries? Has a consensus now emerged in relation to international health policy? Has a new health care ‘model’ appeared? The study of health care reform in Cambodia is a timely opportunity to investigate the implementation of health care reform under extreme conditions. These conditions include a legacy of genocide, long-term conflict, political isolation, and economic transition. This case study uses both qualitative and quantitative methods and multiple sources of data to analyse the reform program. The study reinforces the conclusion that, under conditions of extreme poverty, market based reforms are likely to have limited positive impact. Rather, understanding the cultural conditions that determine demand, delivering health care of a satisfactory quality, providing appropriate incentives for health practitioners, and supporting services with adequate public funding are the prerequisites for improved service delivery and utilisation. Cambodia's strategy of integrated district health service development and universal population coverage may provide an instructive example of reform. Emerging policy issues identified by this case study include the fundamental role of equity in service provision, the influence of the social determinants of health and illness and interest in the appropriate use of evidence in international health policy-making.

Global education policy directives : impact on teachers from the north and south

Education policies from international organisations such as the World Bank and OECD are restructuring education to promote a utilitarian vision of education. By examining the experiences and opinions of teachers from countries representing north-south global regions, it is possible to identify the social and political implications of education reform as it impacts on teachers as not only practitioners, but also as social and political agents. As global communities are more inexorably linked through global, macro policies, an outcome of this trend is a growing political and social divide between the global north and south. The paper aims to identify and discuss the significant concerns of teachers from the global north and south in relation to education reform.

The meaning of capacity building in Indonesia

Capacity building has been prominent in development projects of various kinds for the last decade. Capacity is, in this context, an amorphous term broadly defined as the ability of people, organizations, and communities to handle all the aspects of existence that relate to them (Vincent-Lancrin, 2006). Capacity building generally refers to efforts to develop this ability among particular groups, resulting in enhanced potential to manage their own needs (Potter and Brough, 2004). Capacity building and the associated process of capacity development have been considered central in improving governance, civil society institutions, and local administrations in developing countries (Brinkerhoff, 2000). The World Bank, with its emphasis on strengthening governance, has made capacity building a focus of its programs and leads the development of relevant models and evaluative measures (Wilhelm and Kushnarova, 2004; Straussman, 2007).

Despite its importance in development circles and a quantity of scholarly consideration, the effects of capacity building initiatives are difficult to document and evaluate, and the concept has generated criticism as well as support. Though many aspects of capacity building have been elucidated, one issue that remains less thoroughly studied is the concept’s meaning to target populations. This paper considers the meaning and nature of capacity building in Indonesia, including local perceptions of the concept. This, it is hoped, will offer insight into the whole question of capacity in that nation and that this discussion will inform future development efforts.

The simplicity of educational reforms : defining globalization and reframing educational policies during the 1990s

Reviewing the trends in educational reforms from the last decade provides opportunity for policy makers to understand the issues from the past with a view to improving the educational planning in the future. In the 90s globalization emerged as a great impetus for educational reforms, however a central problem concerning globalization was its full meaning and implications were still emergent therefore educational planning and policy making reflected a great deal of uncertainty. This paper reviews and analyses how educational policies from the 90s constructed globalization and uncertainty and whether the lessons from the 90s have implications for current policy making. Using computer assisted text analysis, this paper explores how educational policies from OECD, UNESCO and the World Bank coalesced with certain notions of globalisation that strategically guided educational reforms. By focusing on textual evidence, in a range of education policy from the 90s, the paper discusses how policy consolidated particular ideas about globalization and presented ‘simple’ recipes for educational change. When reviewing the 90s, the relationship between education and global change the macro policy research shows a trend towards narrowing focus on managerial and financial issues, specifically the paper discusses how OECD policy emphasized education a social and individual payoff, World Bank policy focused on education enabling the free flow of capital and UNESCO policy problematised globalization but focused on the importance of teachers as a way to create stability in education during the paradoxical times.

Payoff, capital and teachers : education policies of the 90s

Although education remains in the flux of change, reviewing the trends in educational reforms in the last decade provides opportunity to learn from the past with a view to improving the educational strategies guiding reforms in the future. As globalisation has become more consolidated in education policy, investigating how particular ideas about globalisation inhabited policy and established over time, presents ways of addressing and challenging the assumptions about education and globalization in the 90s and the fall out from these ideas. Using evidence based policy research, this paper explores how educational policies from OECD, UNESCO and the World Bank coalesced with certain notions of globalisation that strategically guided educational reforms. An analysis of education-globalisation nexus in the policies of OECD, UNESCO and the World Bank evidences the distinct character and agenda of each agency. By focusing on textual evidence, in a range of education policy from the 90s, the paper discusses how policy consolidated particular ideas about globalization and presented ‘simple’ recipes for educational change. When reviewing the 90s, the relationship between education and global change shows that OECD policy emphasized education as a social and individual payoff, World Bank policy focused on education creating certainty enabling the free flow of capital, and UNESCO policy problematised globalization and focused on the importance of teachers as a way to create stability in education during the paradoxical times.

Policy-based lending, structural adjustment and economic growth in Pakistan

This paper provides an econometric analysis of Pakistan’s structural adjustment program. Introduced in 1980, this program has been supported by the World Bank and IMF under their policy-based lending regimes. Building on recent advances in modelling the impact of policy reform, the paper applies a smooth transitions model to Pakistani real GDP data for the period 1960–2000. Results of this analysis suggest that the adjustment program has not stimulated growth in Pakistan, and that the origins of Pakistan’s post-program growth performance well pre-date this program.

Aid, economic reform, and public sector fiscal behaviour in developing countries

This paper looks at interactions between foreign development aid, economic reform, and public sector fiscal behavior. It proposes a model of the public sector fiscal response to aid inflows, which allows for changes in structural relationships due to an exogenously imposed program of economic reform. This model is applied to 1960–99 time series data for the Philippines, which embarked on an IMF- and World Bank-funded structural adjustment program in 1980. Estimates of structural and reduced-form equations paint a dismal picture of the effectiveness of foreign aid to, and the structural adjustment program in, the Philippines so far as fiscal impacts are concerned. Both bilateral and multilateral aid inflows, and the presence of an economic reform program, are associated with decreases in public fixed capital expenditure, decreases in taxation and other recurrent revenue, and decreases in public sector saving. Multilateral aid also appears to be highly fungible.