Search

Begin New Search Topic Development Content Type Policy Brief

91. Implementation of the WTO Investment Facilitation for Development Agreement: Identification of Reform Needs and Development Policy Measures

Author:
Axel Berger, Ann Margret Bolmer, Florian Gitt, Zoryana Olekseyuk, and Marius Metz
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
More than 110 Members of the World Trade Organization (WTO), many of them developing countries and least-developed countries (LDCs), are negotiating a plurilateral Agreement on Investment Facilitation for Development (IFD). In contract to existing bilateral investment treaties that establish sweeping rules on investment protection and liberalisation, the IFD Agreement aims at increasing the transparency, predictability and efficiency of investment frameworks as well as improving inter-governmental coordination and international cooperation on investment matters. In view of the fact that WTO Members aim at concluding the negotiations by mid-2023, discussions are under way on how the IFD Agreement can successfully be implemented in developing countries, and LDCs in particular. The IFD Agreement includes a comprehensive section on Special and Differential Treatment, which grants developing countries and LDCs longer timeframes as well as technical assistance and capacity development to support implementation. The Agreement also foresees so-called needs assessments at the country level to evaluate countries’ readiness and support needs to implement the IFD Agreement. While such needs assessments have been extensively used in the context of the WTO Trade Facilitation Agreement (TFA), we lack insights into how such needs assessments can be operationalised in the context of investment facilitation and what kind of imple¬mentation challenges are prevalent, in particular in LDCs. To assess implementation gaps, barriers to successful implementation as well as national and international support actions, we conducted pilot needs assessments covering a selected group of IFD Agreement measures with a broad range of stakeholders in three LDCs, namely Lao People’s Democratic Republic (Lao PDR), Togo and Zambia. Our pilots indicate that 13 selected provisions of the IFD Agreement have not been sufficiently implemented across the three LDCs. In particular, 64 per cent of analysed provisions have only partially been implement, while the rest have not been implemented at all. These findings underline that, in order to benefit from the IFD Agreement, LDCs need substantial implementation support from the international community. The most striking, commonly identified barriers hindering the full implementation are lack of cooperation and coordination among investment-competent agencies, poor information management for investors as well as limited digitalisation and automatisation. To overcome these barriers, nationally identified actions may focus mainly on the creation of a single information portal for foreign investors and a single-window system to improve authorisation procedures, as well as a clarification of mandates and functions of relevant ministries and institutions. Our research also underlines the importance of a whole-of-government and multi-stakeholder approach. The establishment of a National Investment Facilitation Committee may prove to be an effective instrument to ensure coordination and communication between involved stakeholders. International support should complement national actions with technical assistance and capacity development in investment-related topics, improving information and communication technology (ICT) infrastructures and digitalised processes, as well as fostering the international exchange of best practices. Our pilot needs assessments emphasise that the WTO Secretariat and the negotiating Members should strengthen outreach activities to promote knowledge about the WTO IFD Agreement among national-level stakeholders. In general, our pilots underline that needs assessments are an important instrument for identifying persistent implementation gaps and tailoring technical assistance and capacity development to the demands of Members, especially LDCs.
Topic:
Development, Reform, Investment, WTO, and Development Policy
Political Geography:
Global Focus

92. The BEPS Project: Achievements and Remaining Challenges

Author:
Sabine Laudage Teles
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
The Base Erosion and Profit Shifting (BEPS) Project of the Organisation for Economic Co-operation and Development (OECD) and the G20 aims to reduce harmful tax avoidance and evasion by multinational enterprises (MNEs), which creates large losses in governments’ revenues. In times of multiple crises, many governments urgently seek additional revenue sources to finance public expenditures for sustainable development. In particular, many low- and lower-middle-income countries have tax-to-GDP ratios of less than 15 per cent, which is insufficient to provide basic public goods such as health, education and infrastructure for their populations. This policy brief evaluates the achievements and remaining challenges of the BEPS Project to mobilise more domestic revenues, in particular in low- and middle-income countries (LMICs). After the financial crisis of 2009, the G20 mandated the OECD with the design and implementation of the BEPS Project. The goal was to identify and tackle the most pressing issues that led to the erosion of corporate tax bases in their member countries. A key issue is the phenomenon that MNEs avoid large amounts of tax by shifting their profits from affiliates in high-tax countries to affiliates in low-tax countries. In 2013, the OECD presented its 15-point agenda to tackle BEPS in OECD member states. However, global tax avoidance and profit shifting can only be effectively addressed if a large number of countries is on board. Thus, in 2016, the Project opened for non-OECD/G20 countries to join the Inclusive Framework on BEPS and the implementation process of the BEPS Action Plan. However, tax administrations of many LMICs complain about the highly complex rules designed under the BEPS Action Plan that are not adapted to their context-specific capacities and needs. Today, the Inclusive Framework on BEPS has 145 member countries, and the implementation of the BEPS Action Plan is almost finished. Preliminary academic evidence shows that the overall impact of the BEPS Project in reducing global tax avoidance and profit shifting is indeed limited. According to recent estimates, tax revenue losses due to profit shifting even increased from 9 to 10 per cent in the first years when anti-BEPS measures were implemented (see Wier & Zucman, 2022). Since there is no counterfactual world in which the BEPS Project did not take place, we can only assume that tax avoidance would have increased even more in the absence of the Project. However, the BEPS Project is still considered the biggest overhaul of global tax rules since the last century. Positive achievements include increased awareness of MNEs’ profit shifting behaviour, as well as the agreement on a global minimum tax.
Topic:
Development, G20, Tax Systems, and OECD
Political Geography:
Global Focus

93. Relational Contracts in the Rwandan Coffee Chain

Author:
Kasper Vrolijk
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
Businesses often engage in long-term relationships with firms and people they trust and know, in which they informally sell and exchange information and services (Baker, Gibbons, & Murphy, 2002). As postulated by Arrow (1972, p. 357), “virtually every commercial trans-action has within itself an element of trust”. Within these relations, trust is defined as the belief that market actors adhere to informal contract arrangements. Particularly in lower-income countries, which are often described by distortions – such as inefficient institutions (e.g., contract enforcement), imperfect markets (e.g., access to credit), and market distortions created by firms (e.g., lobbying) (Atkin & Khandelwal, 2020) – such relational contracts are important for commercial interactions locally and internationally and are an important complement to formal contracts. In low-income economies, how are relational contracts used to foster economic activity? What policy measures can be used to aid trust-based relational contracts, or to address its inefficiencies? This Policy Brief presents the results from a study on the Rwandan coffee chain, which surveyed coffee mills, farmers and exporters on their performance and relational contracts. The main findings are that relational contracts are an important component at two levels of the chain: (a) between cooperatives, washing stations and mills, and its members, and (b) between mills and buyers. Mills, for example, offer informal provisions to its farmers to ensure timely delivery of high-quality beans. Exporters and mills invest in trust-based relationships with buyers by spending on getting market access and productivity-increasing activities (e.g., investing in new machinery) in anticipation of future buyer demand and prior to formal contracting. Buyers likewise invest in creating and maintaining relational contracts to local firms by providing informal technical and financial support. With the exception of certification programmes, few of the activities that both mills and buyers undertake are formally enforced through contracts but instead are done at the discretion of producers and buyers. Such informal relations are important and necessary because in low-income countries there can be market risks (e.g., limited access to inputs for farmers) that, if not addressed, affect the coffee supply and quality. The coffee sector in Rwanda is to a large extent com-parable to the coffee sector in other countries and other agricultural supply chains in low-income countries (like labour- and quality-intensive products, such as tea and cocoa). Therefore, this study may offer some valuable lessons to policy makers: 1. Promote brokerage services to support trust-based relationships between local firms and international buyers. Brokerage services include programmes (either by governments of international organisations) that bring together and facilitate buyer-supplier linkages. These services have proven successful in creating long-term buyer-supplier relationships, while also facilitating financial and technical support for local firms and market access. There is a role for both international organisations and national governments to provide financing or facilitate such services. 2. Use certification to formalise quality upgrading and market access. Certification programmes include credible, internationally recognised standards and evaluation protocols that are used across multiple commodities. Certification can help formalise some of the quality upgrading and market access activities that firms and farmers otherwise would receive informally through relational contracts. There are roles for national governments to promote and subsidise certification practices and for international organisations and certification providers to expand such services.
Topic:
Development, Markets, Business, and Contracts
Political Geography:
Africa and Rwanda

94. Improving Employment and Social Cohesion among Refugee and Host Communities through TVET: Evidence from an Impact Assessment in Ethiopia

Author:
Abis Getachew, Lisa Höckel, Jana Kuhnt, Abdirahman A. Muhumad, and Armin von Schiller
Publication Date:
01-2023
Content Type:
Policy Brief
Institution:
German Institute of Development and Sustainability (IDOS)
Abstract:
In pursuit of employment opportunities and increased productivity, governments and donors have the highest ambitions for technical and vocational education and training (TVET) systems. Most prominently, TVET is expected to facilitate access to employment and a qualified workforce by offering its graduates skills that the labour market demands. Beyond its employment impacts, TVET supporters also anticipate that it will improve societal outcomes such as inclusion, gender equality and social cohesion. Access to the labour market plays an essential role in allowing displaced populations to sustain their livelihoods and to foster socio-economic integration. Long-term displacement situations and a decline in resettlement opportunities have spurred the quest for local integration in countries of first asylum. It is in this context that TVET has gained additional salience in the past decade. Does TVET live up to these promises? Overall, systematic empirical evidence on the impact of TVET is limited and often inconsistent. In terms of employment and income, evidence suggests that there is a small positive effect, but time plays an important factor. Often, impacts are only seen in the medium- to long-term, and in general, programmes tend to work better for the long-term unemployed. Evidence of societal effects is even more limited; there is a large gap of knowledge on the potential social cohesion impacts of TVET. Given the amount of funding and the high expectations found in the policy discourse, it is essential to better understand if and how TVET measures contribute to achieving their self-declared goals. In this brief, we present the results of an accompanying research study of an inclusive TVET programme implemented by the German development cooperation organisation Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ) in Ethiopia. In this programme, host and refugee participants are jointly trained, with the explicit goals of fostering social cohesion and improving employment opportunities. The results indicate that while the social cohesion effect seems remarkable on several dimensions, the income and employment effect is at best weak and materialises only for specific groups of individuals. Qualitative and quantitative evidence supports the validity of the approach to achieve social cohesion. More than design or implementation problems, the lack of stronger employment effects appears to be driven by structural context conditions like limited labour market absorption capacity, legal work permission constraints, gender barriers and similar hindering factors. We derive the following main recommendations from the analysis: TVET measures need a careful context analysis (including labour market capacities, legal work barriers) to ensure that the necessary conditions for TVET to succeed are in place. This is particularly relevant in terms of employment effects, which appear to be elusive. Inclusive TVET measures seem to be an effective tool to improve social cohesion. However, if social cohesion effects are valued not just as an “add-on” to employment effects but as primary goals, the question arises if alternative interventions might be more efficient. This question is particularly salient given the modest evidence regarding employment and income effects. The evidence base of the impact of (inclusive) TVET programmes needs to be expanded. Knowledge gaps that need to be closed include TVET’s impact on displaced populations, its potential societal effects, differential gender effects, and medium- to long-term employment and income effects.
Topic:
Development, Employment, Refugees, Integration, and Social Cohesion
Political Geography:
Africa and Ethiopia

95. Global Perspectives on ESG and Implications for Korea

Author:
Jinyoung Moon, Sang-Ha Yoon, Jiwon Park, Seung Kwon Na, and Sunghee Lee
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
ESG, which stands for Environmental, Social, and Governance, has gained significant importance in recent years. Adoption of Paris Agreement and Sustainable Development Goals and efforts to recover from COVID-19 have contributed to this global trend. Businesses and regulators are now placing more emphasis on the sustainability of economic activities and transparent disclosure of ESG information. In light of this, our study focuses on examining global ESG policy trends and supply chain due diligence regulations. We also compare ESG scores of firms across major countries and analyze the impacts of ESG performances on employment and productivity. Based on our findings, we aim to provide recommendations and implications for the government and private sector to address ESG in practice.
Topic:
Development, Economics, Environment, Governance, and Sustainability
Political Geography:
Asia and South Korea

96. Strategies to Raise Public Awareness on Development Cooperation

Author:
Jeonghwan Yun
Publication Date:
07-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
"From aid recipient to donor” is a slogan commonly used to promote Korea’s development cooperation. The slogan not only represents HOW Korea tries to contribute to the developing world with its unique development experience, but it also shows WHY Korea thinks they should. This report quantitatively evaluates the efficacy of public awareness strategy in Korea. Utilizing a survey experiment data from “Survey for Public Awareness in Korea on Development Cooperation (2022),” I show how better understanding on the international actors of development cooperation makes a difference in the public awareness. Specifically, those with higher level of "trust" on international organization and developing countries are likely to exert complementary effect and show higher support on Korea's contribution, once provided of descriptive news about current challenges in developing world. While negative imagery seems induce more immediate response on ODA support, such complementary effect implies the importance of building a social trust about the global community and promoting better understanding of the developing world, and how the public awareness can lead to a substantial support of Korea's ODA in the long-run, without facing "compassion fatigue."
Topic:
Development, International Cooperation, and Foreign Aid
Political Geography:
Asia and South Korea

97. Impact of China's Emissions Trading System on Industries and its Policy Implications

Author:
Jihyun Jung
Publication Date:
10-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
China, the world's largest carbon emitter and skeptical of developing countries’ emissions reduction commitments, announced internationally in 2020 its vision to peak carbon emissions in 2030 and achieve carbon neutrality by 2060. China's emission reduction strategy has a significant impact on China's economy and society as a whole, and Korea, which has a close economic ties with China, will also be affected. China's carbon neutral policy announced in 2021 includes the continuous promotion of policies such as direct regulation, public investment, and subsidies, as well as the nationwide implementation of the ETS and the expansion of applicable industries. This study analyzed the impact of China's ETS on Chinese industries using the input-output model, and derived implications for Korea-China economic relations based on the results.
Topic:
Climate Change, Development, Economics, Trade, Industry, and Carbon Emissions
Political Geography:
China, Asia, and South Korea

98. Central Asia’s Trade Strategies and Korea-Central Asia Cooperation Plans

Author:
Minhyeon Jeong, Dongyeon Jeong, Jiyoung Min, and Boogyun Kang
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The purpose of this research is to derive the future directions of the cooperation between Korea and Central Asia under the global uncertainty that is deepening with the competition and confrontation of major powers that cannot be easily resolved, and as the strategic value of economic security increases. In the situation where the sanctions against the Russian economy are expected to be prolonged, the geographical value of Central Asia, which connects Russia and Europe, becomes more prominent. In addition, given the rich natural resources and relatively young population structure of Central Asia, expanding cooperation with Central Asia has even more significant implications. In this study, we classified the five Central Asian countries into three middle-income countries (Kazakhstan, Uzbekistan, Turkmenistan) and two low-income countries (Kyrgyzstan, Tajikistan) based on the similarities and differences revealed in the structural characteristics of each country's economy and the level of development. According to this classification, we analyzed the direction of cooperation in the digital, climate change, and health and medical sectors, which are currently in high demand for cooperation.
Topic:
Climate Change, Development, Economics, Health, International Cooperation, and Trade
Political Geography:
Central Asia and South Korea

99. U.S. Trade Strategies and Korea-U.S. Cooperation Plans

Author:
Gu Sang Kang, Hyok Jung Kim, Jonghyuk Kim, Hyuk Ju Kwon, Eunbin Park, and Yeo Joon Yoon
Publication Date:
12-2023
Content Type:
Policy Brief
Institution:
Korea Institute for International Economic Policy (KIEP)
Abstract:
The U.S. has taken a leading role in global discussions, not only in addressing major economic and trade issues but also in formulating cooperative measures on the international stage. Consequently, understanding the U.S. position and response strategies for each critical issue arising from external shocks is essential. This understanding holds significant importance in shaping Korea's mid- to long-term foreign economic strategy. By comprehending the U.S. position and response strategies, particularly regarding major issues, this study aims to derive Korea’s future trade strategies with the U.S. and develop cooperation plans with the U.S. As a result of conducting research under these objectives, the following cooperation strategies between South Korea and the United States have been derived. First, in the context of supply chain restructuring, South Korea should consider expanding local investment and production in the semiconductor and battery sectors within the U.S. close collaboration between the government and companies is essential to maximize national interests. It is crucial for our companies to take advantage of the tax incentives and other regulatory incentives offered by the U.S. government when entering the U.S. market, and our government should provide diplomatic support for these efforts. Regarding digital trade, South Korea should actively participate in international discussions led by the U.S. to set standards for essential infrastructure in the global digital transformation, such as advanced communication networks like 5G and 6G. Further-more, South Korea should actively lead discussions within the IPEF on the Trade Facilitation and Digital Commerce Working Group to overcome limitations within the KORUS FTA's digital trade provisions and collaborate with participating countries to develop a roadmap for digital trade norms. In the area of climate change mitigation, South Korea and the U.S. should strengthen their cooperation by promoting joint research in environmentally friendly, low-carbon technologies such as hydrogen production and utilization, fuel cells, carbon capture, utilization, and storage (CCUS), and energy storage devices. Additionally, both countries should collaborate on producing related products. Furthermore, South Korea should proactively engage with the U.S. in discussions related to climate change policies that the U.S. and the EU are considering. This proactive engagement can help increase the effectiveness of collaborative by anticipating the possibility that these policies may be-come international norms in the future.
Topic:
Development, Economics, International Cooperation, and Trade
Political Geography:
Asia, South Korea, and United States of America

100. Linking Migrant Reintegration Assistance and Development Goals

Author:
Camille Le Coz and Ravenna Sohst
Publication Date:
06-2023
Content Type:
Policy Brief
Institution:
Migration Policy Institute (MPI)
Abstract:
Migration and development are deeply linked. The level of social and economic development in a country shapes why and where people move, and the movement of people affects development in countries of origin, transit, and destination. For migrants returning to their countries of origin, conditions in the communities to which they return shape their employment prospects, access to public services, and other important parts of re-establishing their lives. Recognizing that reintegration does not happen in a vacuum, European policymakers involved in assisted voluntary return and reintegration (AVRR) programs and some origin-country governments have increasingly pushed to add a development angle to reintegration projects. By improving social and economic conditions for returnees and the communities in which they live, these efforts aim to foster sustainable reintegration, boost local development, and reduce the likelihood that returnees will migrate again. However, the path to achieving these intersecting goals is unclear. This issue brief examines the potential benefits of connecting reintegration projects more closely with development goals, mapping existing approaches to creating such links as well as these approaches’ limitations. The brief also outlines measures that could help future policies and programs overcome common hurdles.
Topic:
Development, Migration, Governance, Deportation, Reintegration, and Migrants
Political Geography:
Europe