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Session 5: Measuring Outcomes and Impacts of IC Reform

Session 5: Measuring Outcomes and Impacts of IC Reform. Christine Zhenwei Qiang Manager, International Trade and Investment FIAS Consultative Committee of Donors Meeting November 14-15, 2012. Agenda. Context Impact Program: FY12 Highlights Enhanced M&E framework

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Session 5: Measuring Outcomes and Impacts of IC Reform

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  1. Session 5:Measuring Outcomes and Impacts of IC Reform Christine Zhenwei Qiang Manager, International Trade and Investment FIAS Consultative Committee of Donors Meeting November 14-15, 2012

  2. Agenda • Context • Impact Program: FY12 Highlights • Enhanced M&E framework • Key findings from literature reviews • Impact assessments • Value for money • FY13 Plans

  3. Strategic Directions : Managing for Impact • Fostering Enterprise Creation and Growth • Facilitating International Trade and Investment • Unlocking Sustainable Investments in Key Sectors Economy-wide Industry-specific

  4. Business Life Cycle Objectives: Foster firm creation and formalization, spur firm productivity and long-term growth. 1. Firms should be able to enter the market easily. 2. Markets should be highly competitive, to encourage growth and innovation. 3. Successful firms should continue to capitalize on a competitive/innovative environment. Firms that do not succeed should be able to exit market quickly and efficiently. Continued firm growth Firm creation Firm growth Firm Restructuring Firm size Firm Exit 3. Reduced/eliminated barriers to compete and grow . Accessible mechanisms to restructure/exit. 2. Reduced/eliminated barriers to compete and grow. 1. Reduced costs and time to enter market. Time Firm decisions based on business opportunities, risks and costs of doing business. Business Regulations Reforms

  5. Investment Life Cycle Objectives: Promote integration of a country’s private sector into global value chains, attract and retain FDIs and maximize long-term economic benefits and competitiveness. 1. Stimulate/attract investment (quantity & quality). Create a level playing field for investors (i.e. legal, policy, institutional provisions). 2. Strengthen investor confidence (de jure & de facto). Eliminate barriers to economic/social benefits on investment. 3. Ensure continued investor confidence (de jure & de facto). Maximize linkage and spillover effects to the local economy. Investor aftercare & benefits/spillover to local economy Retained/expanded investment Investment entry Investment exit Economic/social benefits of investment 3. Effective investor protection and performance standards. Opportunities for local firms to grow and compete. Potential regional integration 1. (Accessible) market opportunities. A sufficiently fair/transparent investor entry regime. 2. Investor confidence. Reduced/eliminated costs and risks to get investment returns. Time Investor decisions based on investment opportunities, risks and costs of investing/doing business. Investment Facilitation Reforms

  6. Why are we increasing our focus on impact? Main drivers • Internal drive: to decide what we should do more and less of, we need to understand the impact of IC work (on investment, jobs, growth, poverty) • Client and donor demand for impact measurements: where should we allocate our funds? • WBG management and board • IFC Impact Development Goals and WB Scorecard Goal • Better understand how to maximize the impact of our work, better manage what we do, make strategic choices and tell meaningful stories. Answer key questions for evidence-based policy making: what works, what doesn’t, where, why and for how long? 6

  7. Key Partners • Internal Partners • World Bank Development Impact Evaluation (DIME) unit • World Bank Research Department (DECRG) • FPD Global Practices, FPD Chief Economist office • IFC & FPD Regional Teams • The IFC Development Impact Department (CDI) • Donor community including USAID, DFID and DCED

  8. FIAS Strategy: Managing for Impact Impact projections for the new Investment Climate FY12-18 strategy include: • Private sector savings of over $600 million, which include $350 million in compliance cost savings and $250 million of savings from streamlined trade logistics services. • $3 billion in investment generation: $1 billion from FDI facilitation in priority sectors and $2 billion from new firms created from business entry reforms. • Increase in trade flows by $2.5 billion following trade logistics reforms. • Increased returns to stakeholders by $1.5 billion resulting from 11,000 firms continuing as going concern after debt resolution reforms. • A 10 percent increase in the number of enterprises complying with tax requirement within three years of supported tax reforms.

  9. Agenda • Context • Impact Program: FY12 Highlights • Enhanced M&E framework • Key findings from literature reviews • Impact evaluations • Cost benchmarking/value for money • FY13 Plans

  10. Joint WBG/Donor Impact Work Program For Operational Improvement Enhanced M&E framework • Develop reach and impact indicators, criteria to claim reforms, and target setting methodologies linked to IDGs Literature reviews • Summarize research on impact of IC reforms on key variables such as firm creation, exports, investment and employment • Identify knowledge gaps Impact assessments • Conduct impact assessments (using various methods) on topics for which there is insufficient evidence in the literature (cross country or country-specific) • Assess the effects that can be attributed to a particular reform (or mix of reforms) Value for money • Develop cost benchmarks for IC reforms • Analyze the value for money and cost effectiveness of IC interventions and develop approach that supports decisions on resource allocation

  11. Agenda • Context • Impact Program: FY12 Highlights • Enhanced M&E framework • Key findings from literature reviews • Impact evaluations • Cost benchmarking/value for money • FY13 Plans

  12. Generic Results Chain

  13. Core Indicators IC Strategic Priorities Reach indicators Outcomes Impacts Outputs • Private sector savings • Investment Generated • Renewable energy expected to be produced (MWh/year) • Trade flows • Jobs Fostering Enterprise Creation and Growth Facilitating International Trade and Investment Unlocking Sustainable Investment in Key Sectors Facilitating Private Participation in Infrastructure and Social Sectors*

  14. Agenda • Context • Impact Program: FY12 Highlights • Enhanced M&E framework • Key findings from literature reviews • Impact evaluations • Value for money • FY13 Plans

  15. Key Findings from the Literature: Business Entry Liberia example Reduce time and cost of business start up by introducing standard articles of incorporation, eliminating the minimum capital requirement, introducing electronic registration. 5 procedures 20 days US$ 88 Knowledge Gaps: Effects on new firms in low income countries; effects on employment, informality and firm survival. 12 procedures 99 days US$ 630 Reducing time to register a business by at least 40% • Examples of improvements: • India: 6% increase in registered firms due to reduction of entry procedures1 • Colombia: 5.8% in newly registered firms due to One-Stop Shop2 • Mexico: 5% new registered firms and 2.8% jobs created due to a One-Stop Shop3 • Source: 1. Aghion et al. (2008), 2. Cárdenas and Rozo (2007), 3. Bruhn (2008). Graph source: Doing Business 2008, 2009, and 2010.

  16. Key Findings from the Literature: Trade Logistics Reduction of number of documents for import and export; introduction of risk-based inspection and introduction of an electronic filing systems; and unification of custom operations at the borders. • Increases bilateral trade: • Sub-Saharan Africa-OECD: By a range between 0.6% and 0.18% 1 • Increases productivity: • China: Generates a 2% increase in productivity for apparel and leather goods industry and more than a 6% increase for consumer goods 2 Reducing time to export by 1 % Reducing time to export by 1 day • Equivalent to an ad-valorem tariff reduction of 0.6% to 2.3% 3 • Increases GDP by 0.98% 4 • 5% reduction in trade costs over 5 years Knowledge gaps:Effects on intra-regional trade, foreign direct investment and on corruption; effects of reducing number of documents versus introducing risk-based inspections or streamlining custom procedures; effects of single window solutions. Source: 1. Subramanian, Anderson and Lee (expect 2012); 2. Subramanian, et al (2005) , 3. Hummels(2012), 4. APEC (2004)

  17. Key Findings from the Literature: Competition Policy Applying pro-competition sectoral policies effective economy-wide, the enforcement of antitrust rules to deter anti-competitive practices such as cartel agreements, anti-competitive mergers, price controls, statutory monopolies and similar. • Increases innovation, growth and competitiveness: • More patents, product variety and quality • Higher (L, TF) productivity growth • Greater welfare benefits, esp. for poor • Greater competition (lower price-cost margins, entry of new competitors) • Lower prices and boost productivity: • Mexico: Lower costs/prices between 8% (transport) and 37% (airfares) • Ukraine - India: Increased productivity by 3.6%- 87% (LP Indian retailers) • Kenya: Increased output (98% maize in Kenya) • Liberalization of sectors (deregulation, removal of price controls and legal monopolies) • Positively impact prices, GDP and other variables: • Lower prices (10-45%) • Productivity growth (1-30 percentage points) • Consumer savings and GDP boost • Effective enforcement of competition laws Knowledge Gaps: Effects of various competition policy reforms on country competitiveness and relative effects on market competition.

  18. Agenda • Context • Impact Program: FY12 Highlights • Enhanced M&E framework • Key findings from literature reviews • Impact assessments • Value for money • FY13 Plans

  19. A Thinking Framework • Impact Evaluation helps us to answer key questions for evidence-based policy making: what works, what doesn’t, where, why and for how much? • Question 1: What is the overall impact of the reform/intervention? • How far down the impact chain to growth, investment and jobs can we expect to go? • Question 2: How do we make it work better? • Variations in intervention/plausible alternatives • Complementary interventions • Information/Outreach • Demand side firm/investor behavior • Supply side incentives

  20. Example #1: Simplifying Business Registration (1/4) • Reform: Introducing a one-stop-shop for business registration • Other dimensions to think about: • Distributional effects • Survival rates • Bribes vs. inspections

  21. Example #1: Simplifying Business Registration (2/4)

  22. Example #1: Simplifying Business Registration (3/4)Malawi Case / Complementary Interventions Malawi

  23. Example #1: Simplifying Business Registration (4/4) Malawi Case / Theory of Change (not exhaustive) Impacts Activities Intermediate Outcomes Access to Markets Increased turnover Access to Lending Increased profits Formality + Business bank account Access to Savings Increased investment Increased employment Mental separation of accounts Better standards of living Lower harassment

  24. Example #2: Investment Incentives Using Matching Grants • Intervention: Matching grant to incentivize investment in business development services in the biotech industry • Other dimensions to think about: • Financial/fiscal costs • Claim rate after approval • “Crowding in” vs. “crowding out” investment • Market distortion?

  25. Example #3: Inspections • Intervention: Risk-based inspection and guidance document to businesses • Other dimensions to think about: • Threshold effects • Higher compliance with lower costs • Corruption • Exit rate of non-complying firms • Product price and quality

  26. FY13: Paris Impact Evaluation Workshop • SET THE STAGE for new impact evaluations… • ADDRESS knowledge gaps… • TRAIN on evaluation methods… • DEVELOP implementation plans... • BUILD an IC impact evaluation community of practice Objectives • To develop a high-quality impact evaluation design and implementation plan through clinics by bringing together a country/project delegation with impact evaluation experts • To enhance the country/project delegation’s technical capacity to design and implement impact evaluation of IC reforms through hands-on training on methods and policies • To create an IC impact evaluation community of practice with donors, practitioners, country representatives, and WBG partners Participants • Delegations of client representatives, experts and facilitators to agree on the IE building blocks and implementation plans • Countries represented: Albania, Bangladesh, Benin, Bosnia and Herzegovina, Kenya, Kosovo, Malawi, Moldova, Nepal, Romania, Serbia, Tajikistan

  27. Agenda • Context • Impact Program: FY12 Highlights • Enhanced M&E framework • Key findings from literature reviews • Impact assessments • Value for money • FY13 Plans

  28. Value for Money • Plans • Development of reform cost parameters/metrics • Recommendation on how to convert benefits (outcome, reach and impact measures) into “value” • Analysis of cost effectiveness • Progress • An internal working group to summarize previous experiences of setting up cost effectiveness measures • The new M&E framework includes new value elements • An analysis of trends in cost by reform area is underway for the current portfolio of projects • Trying to align cost elements with the project budgeting system

  29. Value for Money: Central America Remittances Database • Results of Enviacentroamerica database • Estimate: 1% decline in remittance costs amounts to approximately $600 million directly received by Central American remittance recipients and the local economy by 2016. • Cost: $150K World Bank and $160K IADB; in kind support from CEMLA Value for money (donor perspective): $1,870 received by Central American remittance recipients and the local economy for each $1 spent by the Bank & the IADB. 1Using the IFC Impact Development Goal methodology to calculate impact of remittances work - to be confirmed after we hear from Massimo and Marco

  30. Agenda • Context • Impact Program: FY12 Highlights • Enhanced M&E framework • Key findings from literature reviews • Impact assessments • Value for money • FY13 Plans

  31. Investment Climate Impact Website

  32. FY13 Plans • New literature review on investment policy, industry IC reforms (agribusiness) and job creation • Explore to collect investment and trade flows data • Programmatic approach to impact assessments • Launch at least 5 impact assessments • Use of mixed-methods to address constraints • Assess sustainability and inclusion dimensions of reforms • Developing methodology and initial analysis of Value for Money • Expand the steering committee of the joint WBG/Donor impact program

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