Creating Better Business Environments for Enterprise Development: Asia Overview Paper Ray Mallon 12/2/2006 1
Introduction Aim is to generate interest in identifying generic lessons from Asian experiences that may have broader applicability. The business environment is important because of the links with growth in output, employment and poverty. My practical experience (bias) has been focused on Southeast Asia (especially the Mekong region). 12/2/2006 2
Outline of Discussion Key developments in Asia related to BE reforms Common Asian experiences with BE reforms Common issues in planning BE reforms Implications for Donor support to BE reform. 12/2/2006 3
Key developments in Asia related to BE reforms Remarkable recovery since the Asian crisis Innovation and productivity growth have generated economic growth With sharp declines in poverty. Poverty incidence in Asia fell from 32% in 1990 to 19% today. But not all are benefiting Further improvements needed 12/2/2006 4
Per Capita Incomes 300 Figure: Regional Growth in Per Capita Incomes (1990=100) Index (1990=100) 250 200 150 100 50 0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 12/2/2006 5 Year East Asia & Pacific East Europe/Central Asia OECD Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa
Common Asian experiences with BE reforms Modest changes can have big impacts No single model Limited knowledge Start with credible reforms that have short-terms impacts Learn from experiences. Consultative approaches Anticipate resistance and pressures to backtrack Land reform important, but difficult Reform is a process 12/2/2006 6
Gross Domestic Savings 40.0 Gross Domestic Savings (% of GDP) 30.0 % of GDP 20.0 10.0 0.0 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Year East Asia & Pacific Europe & Central Asia High income: OECD Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa 12/2/2006 7
Common issues in planning BE reforms Priority reform areas Property right protection is critical. Regulatory reform: remove barriers Competition Openness to imports and FDI Labor market flexibility Developing a supportive administrative apparatus 12/2/2006 8
Export Growth Growth (% per year) 35 30 25 20 15 10 5 0-5 -10-15 -20-25 Figure Export Growth (% per year) 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Year East Asia & Pacific Europe & Central Asia High income: OECD Latin America & Caribbean Middle East & North Africa South Asia Sub-Saharan Africa 12/2/2006 9
Common issues in planning BE reforms Processes Changing official and social attitudes Use consultative approaches Actual practices not formal laws matter Media and information dissemination 12/2/2006 10
Implications for Donor support to BE reform. Develop country specific approaches Country specific bottlenecks Differentiate between urban and rural bottlenecks Need for more analysis and attention to sector/industry specific bottlenecks Fewer, but more substantive, analytical studies of national level issues 12/2/2006 11
Implications for Donor support to BE reform. Coordination Coordinate and specialize Policy coherence But competition in ideas is desirable. Initiating and planning programs of support Be humble And do no harm Don t try to do everything at once 12/2/2006 12
Implications for Donor support to BE reform. National ownership of reform processes Changing attitudes Aim to strengthen capacity of existing institutions Sustaining gains from business environment reforms Improving policy and regulatory making processes Better advocacy. Identify adjustment costs Medium-term support to developing market institutions 12/2/2006 13
Implications for Donor support to BE reform. Sustainability: accountability, monitoring and evaluation Improve results based monitoring Ensure frank, independent evaluation of major donor programs. Public Sector Accountability 12/2/2006 14
Summary and Follow-up Hopefully, other conference papers will improve on and add substance to knowledge on Asian experience. Recipient countries need to work with their private sector to prioritize bottlenecks to PSD. Get the important things right. Improve processes to remove regulatory barriers to business development and ensure improved regulatory quality. Facilitate competition and openness Donors need to critical assess country specific bottlenecks, their comparative strengths, in planning support and evaluate the impacts of support. 12/2/2006 15
Thank-you 12/2/2006 16
Practical BE reform impacts (not for use) Dramatic reductions in VN: poverty fell from 58% in 1993, to 24.1% in 2004 More revenue to improve access to goods, services and international experiences. Better public services and infrastructure. People have more time for leisure, civil participation, and education. Increased incomes and economic freedom creates civil vibrancy and demand for more reforms. Some negative impacts of rapid growth on environment and social adjustment 12/2/2006 17