Development Strategy Reconsidered
Development Strategy Reconsidered

Author: T?ru Yanagihara

Publisher: World Bank Publications

Published: 1998

Total Pages: 63

ISBN-13:

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March 1998 In developing strategy, the Mexican government has been politically inclined to favor agricultural or rural states over nonagricultural states--and less productive rural states--although its focus on the subsistence sector seems to have diminished recently. Different ways of discussing development strategy often reflect different definitions of development. Analysts who emphasize income or production as indicators of development may focus on macroeconomics or sectors. Other analysts may focus on distribution and social aspects as development. Economists tend to see development strategy from the normative, technocratic perspective of welfare economics. Political scientists may see development as a process of political interaction between different interests. Using Mexico as a case, the authors examine macroeconomic conditions and policies (based on flow of funds tables) and estimates of resource transfers between sectors and regions, to relate them to development strategies. They find that: - Macroeconomic conditions and policies have exerted a strong impact on resource transfers between the productive sector and the financial and fiscal sectors. - Because of the strong impact of macroeconomic conditions and policies, resource transfers between productive sectors were not necessarily evident for either financial or fiscal transfers. But combined transfers from nonagricultural states to agricultural states were significant in three out of four periods examined. - The government more effectively controls fiscal transfers because it is directly involved in decisionmaking about public investment and federal participation. Figures on fiscal transfers suggest that the government favored agricultural states in the quarter century studies. - Fiscal transfers dominated financial transfers--hence the general transfer from nonagricultural states to agricultural states. The Mexican government maintained a strong interventionist stance toward the rural and agricultural sector even as it espoused reducing the government's role in economic management. - During the era of shared development, the government favored less productive agricultural states over highly productive agricultural states. As agrarian reform was reformed, this favoritism diminished and eventually disappeared. - The study results reflect the Mexican government's political inclination to favor agricultural or rural states in coping with macroeconomic turmoil. In terms of development strategy, the federal government may have maintained that preference in securing resource flows, but that focus on the subsistence sector seems to have diminished recently. This paper--a product of the Development Research Group--is part of a larger study of the political economy of rural development strategies.

Development Expenditures and the Local Financing Constraint
Development Expenditures and the Local Financing Constraint

Author: Albert D. K. Agbonyitor

Publisher: World Bank Publications

Published: 1998

Total Pages: 23

ISBN-13:

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April 1998 The inadequacy of local funds is a major financing problem in most low-income economies. It is undercutting the absorption of aid and the sustainability of development projects. Focusing on the local financing constraint sheds new light on issues of aid, fiscal reform, and the management of public spending. The fungibility of aid need not translate into resource flows to fill the local financing gap. Indeed, project aid can widen the local financing gap. To augment direct local financing of development, aid must be nonproject aid that can generate local currency. In the longer term, project aid's effect on local financing lies in its impact on growth and on expanding the base for tax revenues, seigniorage, and borrowing. When inadequate local financing limits project implementation and effective use of aid, local currency funds are more valuable than project aid, at the margin-and it becomes important to reallocate local funds, to leverage project aid, and to raise the quality of investment projects. A persistent gap in local financing complicates programs of fiscal reform. For such programs to be effective, the local financing gap has to be confronted directly by matching planned local fund expenditures against expected local fund receipts. This requires a transparent database to develop indicators and to monitor the allocation and use of local resources. This paper-a product of the Macroeconomics Division II, Eastern Africa Department-is part of a larger effort in the department to understand the effectiveness of development expenditures.

Developing countries' Participation in the World Trade Organization
Developing countries' Participation in the World Trade Organization

Author: Constantine Michalopoulos

Publisher: World Bank Publications

Published: 1998

Total Pages: 43

ISBN-13:

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March 1998 Many developing countries are not participating in the World Trade Organization as much as they should. What can be done about it? In the 1960s and 1970s developing countries viewed UNCTAD rather than the GATT as the main institution through which to promote their interests in international trade. But beginning with the Uruguay Round in the mid-1980s, their attitude changed, many more of them became members of the GATT, and a significant number played an active role in negotiations. Michalopoulos analyzes developing countries' representation and participation in the World Trade Organization (WTO) as of mid-1997 to determine how developing countries can effectively promote their interests and discharge their responsibilities under the rules and agreements of the new organization. He concludes that although many developing countries are actively participating in the new process, more than half of the developing countries that are members of the WTO participate little more than they did in the early 1980s and have not increased their staffing, despite the vastly greater complexity of issues and obligations. Institutional weaknesses at home are the main constraints to effective participation and representation of their interests at the WTO. To make their participation more effective, Michalopoulos recommends that the developing countries establish adequately staffed WTO missions based in Geneva; failing that, pooling their resources and representation in Geneva; and being sure to pay their dues, which are typically small. He recommends that the international community place higher priority on programs of assistance in support of institutional development of poorer countries aimed at enhancing their capacity to participate in the international trading system and the WTO-and that the WTO review its internal rules and procedures to ensure that inadvertently they do not make developing countries participation more difficult. This paper is part of a larger effort by the World Bank to collaborate with the World Trade Organization in developing approaches for the more effective integration of the developing countries in the international trading system. The author may be contacted at [email protected].

The Internationalization of Financial Services in Asia
The Internationalization of Financial Services in Asia

Author: Stijn Claessens

Publisher: World Bank Publications

Published: 1998

Total Pages: 64

ISBN-13:

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April 1998 Asian countries should consider the benefits of opening their financial service sectors more quickly-at the same time that they are liberalizing capital accounts and deregulating domestic financial markets. The internationalization of financial services-eliminating discrimination between the treatment of foreign and domestic providers of financial services and removing barriers to the cross-border provision of financial services-is of global interest, especially in Asia. Most of Asia limits the entry of foreign financial firms much more than otherwise comparable countries do. Empirical evidence for Asia and elsewhere suggests that this slows down institutional development and that, as a result, it costs more to provide financial services. Asian countries could benefit from accelerating the opening of the financial services sector, in conjunction with the further liberalization of capital accounts and domestic deregulation of financial markets. Apart from other benefits, internationalization helps build more robust, efficient financial systems by introducing international practices and standards; by improving the quality, efficiency, and breadth of financial services; and by allowing more stable sources of funds. The ongoing WTO negotiation of financial services under GATS gives countries the opportunity to commit to opening their financial sectors. Safeguards can be built into the process, and the liberalization can be phased in gradually. This paper-a product of the Economic Policy Division, Poverty Reduction and Economic Management Network-is part of a larger effort in the network to study financial reform in developing countries. The paper was written during the summer of 1997, before the East Asia financial crisis and before the conclusion of the WTO negotiations in December 1997.