Sankar: Public Economics and Sustainable Developments Policy

Abstract:

The domain of public economics is increasing as governments‘ policy goal
is shifting from economic development to sustainable development.
Government has to act as a trustee representing future generations, and
public policies must balance and integrate the three pillars (economic,
social and environmental) of sustainable development, recognizing the
ecological limits to growth. As per the UN development Agenda,
sustainable development goals (SDGs) are meant for the period 2015-
2030.This paper reviews the global concerns about ecological limits and
the need for global partnership and considers the preparatory steps for
adoption of SDGs and the means of implementation.

Available for download here.

Humphrey: Infrastructure Finance in the Developing World

From the Introduction:

Among sources of financial support for infrastructure provision in developing countries, multilateral development banks (MDBs) have historically been among the most prominent. For various reasons, the importance of MDBs in infrastructure has declined in relative terms compared to previous lending patterns as well as to other sources of finance. The basic model of an MDB—a cooperative bank operating among a group of countries to support development with financing and knowledge—remains valid and relevant to help fill huge existing infrastructure gaps worldwide. However, the scale of this role will largely depend on the ability of MDBs—including existing ones such as the World Bank and major regional MDBs (RMDBs) as well as new ones such as the recently announced Brazil, Russia, India, China, and South Africa (BRICS) New Development Bank (NDB) and Asian Infrastructure Investment Bank (AIIB)— to adapt their operational policies and governance arrangements to a fast-evolving global economic and political context.

Available for download here.

Ciocoiu: The effects of the European Regional Development Fund on large Romanian enterprises

Abstract:

The regional development of Romania in 2014-2020 should rely on the lessons learned from the 2007-2013 period. In this wider context, the paper analyses the effects of the European Regional Development Fund (ERDF) provided within the 2007-2013 programme focusing on the development of the economic competitiveness, on the large enterprises from the North-East  region of Romania. Three hypotheses are tested within this empirical research. First, that the EU financial assistance granted to a large enterprise implies an increase in its net turnover, gross profit and number of staff. Second, we aim to see whether the increase in the net turnover, gross profit and number of staff is directly linked to the increase of the ERDF grant. Finally, we analyse if the increase of the three indicators is higher for the large enterprises that implemented more projects than for the enterprises that implemented a single project. The analysis also puts under discussion the quality and the availability of the information concerning the projects funded by the European Union in Romania, taking also into consideration the 2014-2020 e-cohesion requirement.

Available for download here.

1MDB Scandal Intensifies

The following post comes from Sheri Kindel:

As reported by the Wall Street Journal, recent government investigations into 1MDB, Malaysia’s sovereign wealth fund, have uncovered a money trail with funds ending up in Prime Minister Najib’s personal bank accounts in AmBank between March 2013 and February 2015. Najib, facing the risk of criminal charges, continues to deny taking funds from 1MDB for personal gain and claims this is an act of “political sabotage” by former Prime Minister Mahathir Mohamad to remove him. 1MDB, now $11.1bn in debt, also denies providing any funds to Najib. Documents produced on the matter are the first evidence directly linking Najib to corruption surrounding the fund.

Funds flowed from SRC International Sbn Bhd, a company linked to 1MDB, into personal accounts of “Dato’Sri Mohd Najib Bin Hj Abd Razak” in Kuala Lumpur. The investigation also exposed a wire transfer of $620M from a Singapore branch of the Swiss Falcon Bank owned by an Abu Dhabi fund into Najib’s Kuala Lumpur bank account. This wire transfer occurred in March 2013 before the General Election and the signing of a joint venture between Malaysia and Abu Dhabi. Documents showed that Abu Dhabi never contributed financially to this partnership and the money was never returned to 1MDB when the project fell through in the development phase. Three other deposits were made into Najib’s various accounts and altogether, Najib received up to $700M.

These findings reach beyond Malaysia as it impacts many banks, including Wells Fargo Bank in New York. According to the documents, the wire transfers were handled through the International Branch of Wells Fargo. Regulators in Singapore, Switzerland, and now the United States are looking to increase money laundering regulations and more closely monitor suspicious transactions.

Helgason: Governance of United Nations Development: Recharging multilateral cooperation for the post-2015 era

Executive Summary:

The universal post-2015 development agenda, to be adopted by the General Assembly in September 2015, will constitute a significantly different mission for United Nations Development than the current one driven by the Millennium Development Goals, both in terms of strong focus on the integration of the economic, social and environmental pillars of sustainable development but also because of the increased emphasis on global challenges. The responsibility for achieving the MDGs, in comparison, was primarily located at the domestic level of developing countries with international support. At the outset of the post-2015 era, the distinction between country and global level development challenges has also become less-and-less obvious. The world has seen an increasing trend in recent years of environmental, health and financial disturbances in one geographical area being cascaded over national borders and amplified into systemic risks for everyone. Development cooperation is increasingly called upon to help developing countries to benefit from globalization, as well as to mitigate its negative impact by supporting the development of policies and institutions to build resilience.

As the functions of UN Development change in the post-2015 era, the organizational model and governance capacity of the Organization will need to be adapted to meet the new requirements. A shift from the present organizational model of specialization to one characterized by greater emphasis on integration in response to the demands of the post-2015 development agenda, for example, will require UN development to develop stronger capacity for horizontal governance and coordination at the intergovernmental and interagency levels. This poses several challenges with implications for governance:

Firstly, the post-2015 development agenda with significant focus on the integration of country and global development action will require innovations in the application of the principles of sovereignty and global responsibility in governance of UN Development;

Secondly, UN Development will increasingly have to work as one in an environment characterized by growing diversity of both national development experiences and sources of financing. This will require UN Development to develop strong governance capacity for internal and external coordination;

Thirdly, in the post-2015 era, UN Development will need to develop an organizational capability anchored in integrated approaches that reduce duplication and fragmentation and enable entities to exploit opportunities for synergy in programming and operations.

 

Available for download here.

Ru: Government Credit, a Double-Edged Sword: Evidence from the China Development Bank

ABSTRACT:

Using unique data from the China Development Bank (CDB), this paper examines the effect of government credit onfirm investment, employment, debt, profitability, and survival. I explore the different effects of various types of government credit (infrastructure vs. industry credit). I also trace the effect of government credit across different levels of the supply chain. Using municipal government turnover timing as an instrument of local government borrowing from the CDB, I find that CDB industry loans to SOEs crowd out private firms in the same industry but crowd in private firms in downstream industries. Private firms with better political connections benefit significantly more from upstream CDB industry loans. I also find both SOEs and private firms benefit from CDB infrastructure loans. From 1998 to 2009, on average, a $1 million increase in government industry credit from the CDB led to a $0.52 million decrease in the private sector’s total assets. Local politicians play a role in CDB credit allocation. I find that municipal politicians borrow significantly more during the early period of their terms, and that promotion prospects incentivize politicians to employ the borrowing pattern.

 

Available for download here.

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.

Available for download here.

Kapur & Raychaudhuri: Rethinking the Financial Design of the World Bank

ABSTRACT:

Since their inception, through 2012, the institutions comprising the World Bank group have been involved in lending nearly a trillion dollars. In this paper, we focus on the IBRD, which is the core of the World Bank. The IBRD has the potential to continue to grow and be an important player in official financial flows, supporting critical long-term development projects with large social returns, in sectors ranging from infrastructure, social sectors, or environment.

The paper argues that this is unlikely to occur in the absence of serious changes in the Bank’s financial structure and lending practices. The relative slow pace of loan growth can be tied directly to difficult constraints both in terms of how the IBRD manages its leverage and equity increases – the gearing ratio has stayed materially unchanged, and there have been only four equity raises since the inception of the World Bank – a period which has seen four global recessions.

This paper seeks to outline the internal and external constraints to capital and gearing, and examines why such constraints have arisen. Subsequently, the paper examines some options that could overcome these constraints.

Available for download here.

LeRoy, Cafcas, McIlvaine, Tarczynska & Mattera (Good Jobs First): Creating Scandals Instead of Jobs | The Failures of Privatized State Economic Development Agencies

Executive Summary:

Three years ago, newly elected governors in several states, most notably Wisconsin and Ohio, decided that the best way to create jobs was to transfer economic development business-recruitment functions to “public-private partnerships.” These experiments in privatization have, by and large, become costly failures.

Privatized development corporations have issued grossly exaggerated job creation claims. They have created “pay to play” appearances of insider dealing and conflicts of interest. They have paid executives larger salaries than governors. They have resisted basic oversight.

State officials cannot say they weren’t warned. In January 2011, Good Jobs First published a report entitled Public-Private Power Grab in which we noted that this approach had already been tried in more than half a dozen states and the track record was far from impressive. In the last three years, the story has grown demonstrably worse, with major problems in both new and old privatized development corporations.

We document here again numerous cases in which the public-private partnerships (PPPs) have become embroiled in scandals involving misuse of taxpayer funds, conflicts of interest, excessive executive pay and bonuses, questionable subsidy awards, exaggerated job-creation claims, lack of public disclosure of key records, and other accountability abuses.

 

Available for download here.

Larson: We Are All Debtors

ABSTRACT:

For the last three decades, cities and towns across the United States have grappled with a severe reduction in public funding which has weakened municipalities’ ability to provide basic services. As a result, municipal governments are increasingly financed by debt. Public Authorities (PA), such as New York’s Empire State Development Corporation, are authorized to issue debt backed by tax dollars. There are tens of thousands of such entities across the United States, a “shadow government” not accountable to voters. PAs operate based on a corporate model in which overleveraged holdings are hidden in subsidiary corporations. Such entities have proved so profitable to the investor class that a new brand of PAs has been created for the sole purpose of issuing “phantom bonds,” money that never reaches the public but is instead siphoned off by investors and bond insurers. The transformation of PAs from vehicles of reform to tools of exploitation illustrates that the solution to the debt crisis is a new economy in which our debts are to our families and our communities, not Wall Street.

 

Available for download here.