Promoting Job Creation in BSEC
and CA Countries:
What Role for the Private Sector?
Karin C. Millett, Head
FIAS Investment Generation-Vienna
Bucharest, June 23, 2008
Economic Growth
• ‘It is absolutely crucial to recognize
that all economic growth takes place at
the level of the productive enterprise –
otherwise it is impossible to have a
clear understanding of the growth
process.’ (Arnold Harberger, December
2005)
• Not all productive enterprises are
private, but the majority will be.
Private Sector as the Engine
•
Significant structural changes have taken place
since the transition to market economies, though
the pace of job destruction has often outpaced that
of job creation. In a market economy, it is clear that
the private sector is the primary creator of jobs.
•
However, job creation by private sector highly
dependent on whether the policy environment
obstructs or enables private enterprises to form,
operate and exit business.
•
While important reforms enacted by countries
represented here, evidence suggests much still to
be done in many countries to create a conducive
environment for private sector development.
Doing Business Indicators (1)
World Bank - Doing Business Report
2008
rank
2007
rank
Change in
rank
Albania
136
135
-1
Armenia
39
46
+7
Azerbaijan
96
97
+1
Bulgaria
46
54
+8
Georgia
18
35
+ 17
Greece
100
95
-5
Kazakhstan
71
71
0
Kyrgyz Republic
94
99
-6
Moldova
92
90
-6
Doing Business Indicators (2)
World Bank - Doing Business Report
2008
rank
2007
rank
Change in
rank
Romania
48
55
+7
Russia
106
112
+6
Serbia
86
84
-2
Tajikistan
153
153
0
Turkey
57
65
+8
Turkmenistan
na
na
na
Ukraine
139
139
0
Uzbekistan
138
145
+7
A key question is productivity
• Two general approaches to increasing productivity,
‘yeast’ and ‘mushrooms’ (Arnold Harberger)
– Yeast makes everything rise uniformly, e.g.,
knowledge, education, ICT
– Mushrooms which ‘pop up’ in unpredictable
places and happen in an industry at the level of
the firm, which is the locus of growth, leading to
real cost reduction (TFP)
• A third approach is to reduce the ‘friction’ in the
economic machine: working on the institutional
milieu.
– This offers opportunity for a public-private dialogue to
improve that milieu, through identifying ‘where the
shoe pinches’ for the private sector.
Towards a more competitive
private sector
Competitiveness
Labor Cost
Corruption
7
Good policies and regulations matter
Learning about
good practice
Capacity building
Source: WDR05.
8
Reform management
Public Private Dialogue as a Tool
Builds momentum for business environment reforms
Helps prioritize binding constraints
Ensure that reform design fits local needs and capacity
Smoothen/accelerate implementation of policy reforms
Promotes accountability, transparency, good governance
Builds trust and restore confidence in post conflict/crisis env.
PPD reforms  Workable reforms  Reforms that work
9
The Key Stakeholders and Processes
in PPD
Define project brief
Investment climate constraints
(Existing benchmarks and surveys)
Stakeholder investigation
(Field interviews and focus groups)
Private sector
Intermediaries
Public authorities
Most significant reforms
(Field interviews and focus groups)
Stakeholder analysis
Design decision
10
Civil Society
Examples of reforms resulting from
PPD
• Turkey— Coordination Council for
Improvement of Investment Climate led to
new framework of laws to facilitate FDI
and dramatically simplify procedure of
registering a new company.
• Bosnia— Bulldozer initiative yielded many
reforms, incl. slashing statutory capital
requirements when registering a LLC.
Example of long-term successful PPD
• Ireland’s Social Partnership (started in early
1970s, became a real force in 1980s, as
economy hit a crisis)
- Government, private sector, labor unions,
farmers, and NGOs—chaired by Prime
Minister’s Office
– Identifying key competitiveness issues and
addressing social equity.
- Important factor in transition from a highinflation, volatile economy to a low inflation,
stable and competitive economy
• Expert Group on Future Skills Needs
Benefits and Outputs from PPD
13
Embarking on a PPD Process
• FIAS/WBG can provide advice and
assistance, drawing on experiences of
over 40 countries around the globe.
• Manuals, guidelines and success stories
are featured on line for those who want to
learn more.
www.publicprivatedialogue.org
Charter of
Good Practice
Lessons
learned
Tools for
practitioners
Case studies
Online
partnerships
PPD Workshop
15
THANK YOU!
Karin Millett
kmillett@worldbank.org
www.fias.net