World Bank: Implementing a Framework for Managing Fiscal Commitments from Public Private Partnerships

From the Introduction:

This note, “Implementing a Frame work for Managing Fiscal Commitments from Public Private Partnerships,” provides guidance on managing fiscal risks from Public-Private Partnerships (PPPs) during approval and implementation. The note provides practical advice on how to: consistently identify and assess fiscal commitments arising from PPPs during project preparation and implementation; incorporate these into the project approval process, including budgeting for these appropriately; and strengthen the monitoring and reporting of fiscal commitments over the lifetime of the project. The note explains the fiscal commitments that can arise from PPP projects; why governments may find it difficult to assess and manage these fiscal commitments and incorporate them into project selection; and the key components of an institutional framework to manage fiscal commitments at both the development and implementation stages of a project, including the roles, responsibilities, and processes for managing PPP fiscal commitments. Finally, the note summarizes the key messages for Task Team Leaders when tackling this agenda, and it provides a subset of main readings on the topic.

 

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Chelsky, Morel & Kabir: Investment Financing in the Wake of the Crisis – The Role of Multilateral Development Banks

ABSTRACT:

Sustained growth in emerging markets and developing economies requires long-term, reliable capital to finance productive investment, including in basic infrastructure. However, the availability and composition of long-term financing is constrained, partly due to fragile market conditions and cyclical weaknesses in parts of the global economy, as well as longer-term trends. This has had a particularly negative impact on developing economies that do not have reliable access to international bond markets and on sectors that have traditionally relied on bank lending (such as infrastructure). At the same time, fiscal space has been eroded by the crisis, and the direct lending capacity of multilateral development banks remains constrained. This heightens the importance of the catalytic role of the official sector in mobilizing long-term financing from the private sector by drawing on its ability to reduce and share risk. This note explores some of the ways in which MDBs are equipped to serve this purpose.

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George: Pension policy design – The core issues

ABSTRACT:

The last two decades have been characterised by significant changes in national pension arrangements. While at first, a consensus seemed to be evolving around a one-size-fits-all reform, more recently the trend has been towards a better customisation of reforms. This paper reviews this process, focusing on five pension policy design issues. These are how policymakers have sought to optimise poverty alleviation effectiveness; the redefinition of the state‘s role in smoothing incomes over the life-course; the balancing of contributions to benefits; adjusting the system to be more responsive to demographic, economic and social changes; and ensuring that reforms will be long-lasting.

While the role of state pensions still appears to be on a diminishing path, there has been a growing realisation of the need to ensure that they remain adequate. This has led to the setting up of innovative minimum pension schemes and credits for periods of childcare and unemployment. The expanding role of private pensions has also led governments to intervene more in their operation. Policymakers have shown strong interest in automatic adjustment mechanisms, to try to bring about required economic changes. However there is greater understanding that for the latter to happen, the state has to engage more with its citizens. While changes in pension systems can help societies respond to the ageing transition, for instance by removing incentives to retire too early or by aligning better the generosity of benefits to contributions made, there will need to be a much broader policy response.

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Mahdavi: The politics of resource expropriation – Why leaders nationalize the oil industry

ABSTRACT:

Why do leaders nationalize the oil industry? In line with a general utility-maximizing theory, I argue that leaders nationalize to maximize state revenues while minimizing costs. The latter includes international retaliation, domestic constraints, and perceived unfairness in profit-sharing with foreign operators. The empirical evidence presented in this paper lends support to four primary findings. Nationalization is most likely (1) in periods of high oil prices, when the risks of expropriation are outweighed by the financial benefits; (2) in non-democratic systems, where executive constraints are limited; (3) in “waves”, that is, after other countries have nationalized, reflecting reduced likelihood of international retaliation; and (4) in political settings marked by resource nationalism, measured by OPEC membership or when there exists a profit-sharing gap between host and foreign governments. The first two findings are consistent with previous empirical research, while the third finding reflects the “diffusion effect” theorized in prior work. The final result represents the original empirical contribution of this paper, that resource nationalism plays a role in determining the timing of oil nationalizations.

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Biancone: Islamic Finance – What Is the Outlook for Italy?

ABSTRACT:

The spread of Islamic financial instruments is an opportunity to offer integration for the immigrant population and to attract, through the specific products, the richness of sovereign funds from the “Arab” countries. However, it is important to consider the possibility of comparing a traditional finance model, which in recent times has given rise to many doubts, with an “alternative” finance model, where the ethical aspect arising from religious principles is very important.

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Du Plessis: A Post-Crisis Reading of the ‘Role of Monetary Policy’

ABSTRACT:

In 1967 Milton Friedman delivered “The Role of Monetary Policy’ as his presidential address to the American Economic Association (AEA). In its published version — Friedman (1968) — it has become, arguably, the most influential paper in modern monetary economics and was recently included in the AEA’s list of the twenty most influential papers published in the first century of the American Economic Review. But the influence of Friedman’s address is based on an interpretation that seriously distorts the content of his main argument. His emphasis on (i) the inadequacy of interest rate policy and (ii) the primacy of financial stability among the positive goals of monetary policy have been ignored or neglected. While balance sheet policies have become ‘unconventional’ in the modern consensus, these policies held a central position in Friedman’s work. I support this argument with a textual analysis of Friedman’s address, read in the light of his preceding scholarship on monetary policy. This reinterpretation is relevant in a world where the balance sheets of central banks have returned to centre stage as has the priority for financial stability.

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Schwarz, Arias, Zviniene, Rudolph, Eckardt, Koettl, Immervoll & Abels: The Inverting Pyramid : Pension Systems Facing Demographic Challenges in Europe and Central Asia

ABSTRACT:

Pension systems in Europe and Central Asia are facing unprecedented demographic change.  While many of the countries in the region have undertaken reforms when the economy faces difficult times, these reforms are frequently reversed when the economy improves.  The demographic challenges that the region faces require a sustained effort toward changing the pension system toward something which provides adequate and sustainable benefits. The book documents the increased generosity of pension systems in Europe from their initial inception, noting that the current expectations of the public are based on the most recent round of generosity.  The book seeks to show a nontechnical audience that such generosity is neither based on customary practice nor affordable in the future. The increased generosity in the past was only possible because the demographic pyramid was expanding, but as it inverts with fewer young people and more elderly, that generosity will no longer be affordable.  Returning to the pension system of the 1970’s will go a long way toward providing adequate and sustainable benefits in the future.   Moving to a more sustainable system will require reforms to labor markets, improvements in savings mechanisms, and may require additional public resources.  The extent to which a country can undertake reforms in labor markets, savings, and public finances can influence the extent to which its pension system will have to change, with different solutions possible for different countries.  But in all cases, the changes that need to be made have to be widely discussed and publicly accepted to prevent reversals.  The book hopes to stimulate widespread public discussion of the issue to help countries make sustainable choices with gradual implementation, before they face such daunting challenges that they have to undertake sudden, harsh measures.

 

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Habib & Liu: The Impact of Ownership Structure and Management Reward on Firm Performance and M&A in China

ABSTRACT:

Research studies have shown how firm performance affects its governance structure, but few have studied the impact of corporate ownership structure and management reward on both firm performance and M&A strategy. With the surge of M&As of Chinese enterprises in the last decade, it would be fruitful to find out their relationships. In this study, we have developed a structural framework with eight hypotheses to describe the relationships. Along with ownership structure and management reward, which are part of the corporate governance, we also include intangible assets as a key resource variable affecting performance and M&A. A LISREL model and the RESSET data base with Chinese public firms’ financial data have been used to test our hypotheses. All the hypotheses are confirmed. The literature contributions and the business implications have been discussed. Finally, future research work has been indicated.

 

Available for download here.

 

Young, Tsai, Wang, Liu & Ahlstrom: Strategy in emerging economies and the theory of the firm

ABSTRACT:

Indigenous emerging economy (EE) firms are increasingly competing in global markets or against multinational corporations (MNCs) in their home markets. But their institutional context at the national and local levels often suffers from what has been termed “institutional weakness” which is believed to put them at a competitive disadvantage on the global playing field. Yet little is known about how EE institutional weakness at the national level translates into competitive disadvantage at the firm level. In this perspectives paper, we examine this shortcoming in the literature. We utilize three popular theories of the firm—neoclassical economics, the resource-based view, and the nexus of contracts view—to examine how EE institutional weakness at the national level affects strategic choices at the firm level. We then explain how these strategic choices affect firm boundaries, internal organization, and the nature of competitive advantage for firms in EEs.

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Jacobides, Drexler & Rico: Rethinking the future of financial services – A structural and evolutionary perspective on regulation

ABSTRACT:

Given the immutable pathologies of human nature, the fundamental reasons why financial crises occur have changed little over time. Nevertheless, the structure of the financial system has undergone a dramatic transformation to a complex, interconnected, immediate, global sector mediated by capital markets. In this paper, we explain why this transformation went largely unnoticed by academics and regulators, and argue that an outdated view of the financial system that looks at “one piece at a time” and ignores the institutional context may do more harm than good. We articulate an alternative view, showing how a systemic analysis, focused on the structure of the sector and its evolution, can lead to a fresh set of proposals. We illustrate our evolutionary structural view with an account of the 2008 financial crisis and preceding events, and assess the fault-lines that currently remain in our financial system. We conclude with a set of concrete proposals that could improve the stability and performance of the financial sector, and help to reframe both analysis and regulation.

 

Available for download here.