Public-Private Dialogue-Vienna: Global Workshop, April 28-30, 2009

1. The Role of Public-Private Dialogue in Investment Climate ReformKarin Millett, Head, Investment Generation, Vienna Office Public-Private Dialogue-Vienna: Global Workshop, April 28-30, 2009 Investment Climate Advisory Services of the World Bank Group, ICAS

2. WorldBank Group’s Role in Investment Climate Development • Supporting development of the institutional foundations for effective markets • Promoting open and competitive markets • Supporting a ‘level playing field’ for national and non-national investors • Ensuring social safety nets TO CONTRIBUTE TO: Job and wealth creation, opportunity for all, and better governance

3. Why PPD Matters: Private Sector as the Engine of 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) • However, the existence of a vibrant private sector is highly dependent on whether the policy environment obstructs or enables private enterprises to form, operate and exit a business. • This is where PPD can play a vital role in helping to improve the institutional milieu through identifying ‘where the shoe pinches’ for the private sector and seeking solutions together with the public sector that will help to reduce the ‘friction’ in the economic machine

4. WBG – Providing Input into Reform Discussions through Benchmarking • Doing Business - annual review of around 180 countries - and selected cities - to assess objective measures of business regulations and their enforcement • Doing Business in SEE - covers 22 cities in seven economies: Albania, Bosnia and Herzegovina, Croatia, Kosovo, FYROM, Montenegro, and Serbia • FDI Indicators - new instrument to review specific conditions for cross-border investment

5. DB and FDI Indicators: what they measure Starting a business Dealing with licenses Employing workers Registering property Getting credit Protecting investors Paying taxes Trading across borders Enforcing contracts Closing a business DB vs.FDI INDICATORS Foreign ownership restrictions Getting Information Starting a Foreign-Owned Business Access to land Currency convertibility and repatriation Arbitrating Disputes - - - - - - - - - - - - - - - - - - - - - - - - -

6. FDI Indicators: Examples of preliminary results from pilot tests (1) Many countries continue to have sector- specific restrictions on FDI: (2) Several countries in Sub-Saharan Africa require an additional approval for foreign investors: - Yes - No sectoral openness index (0-100) sectoral openness index (0-100) (4) Sub-Saharan African countries vary significantly in the type of land occupancy rights they offer: (3) The quality of land rights for foreign investors varies considerably across the world: quality of land use rights index (0-100)

7. Creating a ‘Level Playing Field’ for Domestic and International Investors • Foreign investment can contribue to overall economic development goals by bringing capital, new technologies, int‘l standards, know-how and access to new markets • Important that PPD embrace the needs and interests of both domestic and international investors, creating a ‘level playing field‘ in terms of entry, operation and exit • Benchmarking of DB and FDI conditions provides data as input to PPD on improving investment climate • Current global economic recession has already seen FDI flows contract by around 21% in 2008, with further contraction of at least 13-15% expected in 2009 over 2008 levels • This contraction makes it even more important to ensure fair conditions for cross-border investors, both to attract new ones and retain existing ones

8. The Backdrop against which PPD is currently taking place… Source: IMF World Economic Outlook 2009

9. The Backdrop against which current PPD is taking place (2)… Source: IMF World Economic Outlook 2009

10. Challenges posed to PPD by the current crisis… • The serious impact of the crisis--via financial and trade channels--on households and business--may lead to reduced confidence in the role of the private sector as the engine of growth and thus lessen the appetite for reforms that make private sector policies and regulations more business-friendly • Slowing FDI flows and, in some cases, outflows of current investors, e.g. Finland and Ireland, may result in putting conditions for cross-border investment on the back burner • Need to resist the temptation to engage in financial, trade and investment protectionist policies • Challenge will be for governments not to stifle private sector growth through over regulation • The challenge for those of you in PPD will be to keep the private sector agenda alive and moving forward…

11. PPD Work is more important than ever… • In many countries, PPD has become ‘institutionalized’ in terms of a process, and that forum for dialogue among key actors in a country is important to safeguard—not always with the same individuals or companies at the table but with the same key constituencies having a voice in identifying, analyzing and proposing reforms that the public sector can act upon • Good policies matter and well-functioning institutions are key to growth and development. PPD plays an important role in bringing these about • Good luck with your discussions and deliberations in the coming days!