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  • Author: Bader Al-Saif
  • Publication Date: 03-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: Over time, the Kuwait-Saudi border has developed a unique, flexible approach of firm physical boundaries but open economic boundaries. This approach allows both countries to resolve border disputes, such as an oil-related dispute from 2009 to 2019, but more investment could further strengthen Kuwait-Saudi ties. In a divided zone along their border, Kuwait and Saudi Arabia have introduced a flexible arrangement based on a rigid physical border and a fluid economic border. This flexibility, leading to the co-management and equal profit sharing of hydrocarbons, has largely averted conflict. It rests on constructive ambiguity and avoidance of direct confrontation. The approach has its challenges but showed its merit in 2009–2019 when the two resolved a major dispute over the zone.
  • Topic: Political stability, Conflict, Borders, Investment
  • Political Geography: Kuwait, Saudi Arabia, Gulf Nations
  • Author: Anirudh Burman
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: As India’s economy recovers from the coronavirus pandemic, Indian businesses need efficient financial structures to regain their ground. Key reforms to India’s Insolvency and Bankruptcy Code could fill these gaps. One of the key drivers of economic recovery in India will be the efficient movement of capital from inefficient firms to efficient ones. The economic downturn caused by the coronavirus pandemic has been severe, and India’s economy was one of the worst affected in 2020–2021. Though the economy is recovering faster than initial estimates, sustained economic recovery will not take place if stressed businesses cannot restructure their debts properly or if failing firms cannot be resolved efficiently. India’s bankruptcy law is key to solving these challenges. In 2016 India enacted the Insolvency and Bankruptcy Code, 2016 (IBC), which was a landmark reform to the nation’s financial system and the first comprehensive law to regulate insolvency.1 But the IBC has been suspended for a period of one year since the COVID-19-related lockdown was imposed in March 2020. In its place, India’s banking regulator, the Reserve Bank of India (RBI), has introduced a limited restructuring scheme for COVID-19-related stress in the meantime. Older mechanisms for insolvency that are still in operation have historically not worked according to expectations. As the one-year period of suspension comes to a close, this paper argues that bringing back the IBC—with adequate modifications—is an important prerequisite for sustained economic growth. India historically suffered from a patchwork framework of insolvency laws that either did not give lenders adequate powers to recover their debts upon default or only catered to the interests of certain kinds of lenders—to the exclusion of others.2 The IBC is a modern and comprehensive bankruptcy law that since its enactment has had a significant role in reducing the problem of nonperforming assets (NPAs), or “bad loans,” in India’s financial system. In the wake of the economic disruption caused by COVID-19, the Indian government suspended the operation of critical parts of the IBC. These changes meant that lenders could not trigger insolvency proceedings against defaulting businesses if the default occurred after March 20, 2020. While this suspension possibly prevented unnecessary business failures and provided a “calm period” for the economy, these measures have outlived their utility.
  • Topic: Law, Finance, Economy, COVID-19
  • Political Geography: South Asia, India
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: During the pandemic, Chinese medical and equipment supplies to Chile have come mostly from a diverse cast of Chinese players with local experience in Chile. They adapted to Chile’s unique system of emergency and disaster management. China has become a global power, but there is too little debate about how this has happened and what it means. Many argue that China exports its developmental model and imposes it on other countries. But Chinese players also extend their influence by working through local actors and institutions while adapting and assimilating local and traditional forms, norms, and practices. With a generous multiyear grant from the Ford Foundation, Carnegie has launched an innovative body of research on Chinese engagement strategies in seven regions of the world—Africa, Central Asia, Latin America, the Middle East and North Africa, the Pacific, South Asia, and Southeast Asia. Through a mix of research and strategic convening, this project explores these complex dynamics, including the ways Chinese firms are adapting to local labor laws in Latin America, Chinese banks and funds are exploring traditional Islamic financial and credit products in Southeast Asia and the Middle East, and Chinese actors are helping local workers upgrade their skills in Central Asia. These adaptive Chinese strategies that accommodate and work within local realities are mostly ignored by Western policymakers in particular. Ultimately, the project aims to significantly broaden understanding and debate about China’s role in the world and to generate innovative policy ideas. These could enable local players to better channel Chinese energies to support their societies and economies; provide lessons for Western engagement around the world, especially in developing countries; help China’s own policy community learn from the diversity of Chinese experience; and potentially reduce frictions.
  • Topic: Diplomacy, Disaster Relief, Health, Pandemic, COVID-19
  • Political Geography: China, Asia, South America, Chile
  • Author: Zaha Hassan, Daniel Levy, Hallaamal Keir, Marwan Muasher
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: A new U.S. approach should prioritize protecting the rights and human security of Palestinians and Israelis over maintaining a peace process and attempting short-term fixes. The authors of this paper identified four overarching areas of focus: (1) prioritize rights and protect people, (2) roll back the Trump administration’s actions and reassert international law, (3) clarify expectations for Palestinians and Israelis, and (4) support new multilateral approaches and accountability.
  • Topic: Security, Diplomacy, Territorial Disputes, Peace
  • Political Geography: Middle East, Israel, Palestine, United States of America
  • Author: Zainab Usman, David Landry
  • Publication Date: 04-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: Many African countries have placed economic diversification high on the policy agenda, yet they first need to define what it means in their specific structural and socioeconomic contexts. For decades, economic diversification has been a policy priority for low- and middle-income economies. In the words of former managing director of the International Monetary Fund (IMF), Christine Lagarde, “We know that economic diversification is good for growth. Diversification is also tremendously important for resilience.” Unfortunately, this goal continues to elude many African countries. In fact, the continent is home to eight of the world’s fifteen least economically diversified countries. This reality weakens the foundation of their economic transfomation and slows their pace of progress. It also makes these countries particularly vulnerable to sudden external shocks, as the pandemic-induced disruption of tourism and oil-dependent economies has illustrated. Given the importance of diversifying African economies, it is critical to recognize how various dimensions of diversification can have different implications for the menu of policy options. Closely associated with the process of structural transformation from lower to higher productivity sectors, economic diversification has three evident dimensions. The first relates to the expansion of economic sectors that contribute to employment and production or gross domestic product (GDP) diversification, and the second is associated with international trade or exports diversification. This paper, however, focuses on a third dimension that the economics literature pays scant attention to: fiscal diversification. This fiscal element involves expanding government revenue sources and public expenditure targets and can therefore play a central role in helping to catalyze broader economic transformation through the expansion of activity in specific industries and sectors. It is also critical that policymakers effectively measure the extent to which this objective is being achieved. Both the expansion of existing economic sectors and the creation of new ones may diversify an economy. But these processes are vastly different in practice and will garner distinct outcomes. Of the main tools used by economists to measure diversification, the Theil Index differentiates between the respective contributions of new economic sectors and existing ones to overall diversification. Another tool widely used by development practitioners—the Public Expenditure and Financial Accountability (PEFA) framework—has significant potential for evaluating fiscal diversification but would need to capture more information on government revenue collection and spending and link them to policy objectives.
  • Topic: Economics, Governance, Diversification, Trade
  • Political Geography: Africa
  • Author: Vijay Singh Chauhan, Sruti Vijayakumar
  • Publication Date: 05-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: The World Trade Organization’s Trade Facilitation Agreement has placed trade facilitation initiatives high on the agenda of international governments. This case study of India studies what trade facilitation may mean for a fast-paced economy. In this paper the authors use the trigger presented by the World Trade Organization’s (WTO’s) Trade Facilitation Agreement (TFA) to undertake a comprehensive review of various publicly available studies for India relating to performance measurement of the ecosystem that handles the cross-border movement of goods, focusing on the period since 2015. The paper summarizes the results of six key composite performance indicators—namely, (1) the Organisation for Economic Co-operation and Development’s (OECD’s) trade facilitation indicators (TFIs); (2) the World Bank’s Ease of Doing Business (EODB) Index; (3) the World Bank’s Logistics Performance Index (LPI); (4) the World Economic Forum’s (WEF’s) Global Competitiveness Index (GCI); (5) the World Bank’s World Governance Indicators (WGIs); and (6) the United Nations’ Global Survey on Trade Facilitation and Paperless Trade Implementation (GSTF-PTI). This paper, by examining these composite survey-based indicators and the intertemporal trends they exhibit for India, reveals that they have not been moving in agreement with each other and that some of the trends are evidently counterintuitive. A comparison between delineated subindicators of select composite indicators sometimes indicates surprising trends. Import cargo release times (a performance measurement prescribed by the TFA) for the largest containerized port in the country, the Jawaharlal Nehru Port Trust (JNPT), have been extracted from various studies that have relied on the data from the customs automation system; the container tracking system, which employs radio-frequency identification (RFID); and survey-based studies, including the Trading Across Borders (TAB) component of the World Bank’s EODB Index. These import cargo release time studies present a consistent trend of improvement since 2017. The paper, therefore, highlights the greater robustness of cargo release time trends, based particularly on technology-enabled data-driven studies as a more meaningful metric for measurement of performance of border management agencies and practices vis-à-vis survey or perception-based indicators representing “enablers” of trade facilitation.
  • Topic: Economics, Trade, WTO
  • Political Geography: South Asia, India
  • Author: Ankit Bhatia
  • Publication Date: 05-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: As India’s economy has become more urban and industrialized, property and land rights have evolved, too. In the states of Gujarat and Karnataka, key reforms in land leasing and change in land use show what may—and what may not—be a path forward. India is primarily an agrarian society. More than 60 percent of its population is dependent on agriculture and allied services and dwells in rural areas. In the past couple of decades, India has attempted to shift away from its rural-agrarian base toward an urban-industrialized economy. In this journey, it encountered many challenges, but none remain as severe and persistent as the ones related to the assignment and balancing of land and property rights. Land governance in India remains historically complex, politically sensitive, and economically inefficient. In recent times, state governments have attempted proactive measures to reform the sector and bring greater efficiency to land markets. Despite the exigency of these reforms, issues surrounding equity, abuse of power, and nexus among powerbrokers remain central and require thorough analysis. To unpack the fuller effects of the recent reforms, this paper aims to examine key reforms in land leasing and change in land use sub-sectors initiated by Gujarat and Karnataka states. The paper takes a comparative assessment approach to decipher the nuances and complexities of land governances in the two states. Given that land has deep historical connections, this paper briefly delves into the historical evolution of land leasing and change in land use regulation in the two states. The historical analysis highlights the political economy context of each sector and is followed by an in-depth review of the recent reforms. The paper covers reforms effectuated through legislative, executive, and judiciary actions. This approach allows a comprehensive tracking of different mechanisms at play. The paper brings out some interesting findings. In both the states, the change in land use sub-sector was able to reform more frequently than the land leasing sub-sector. Despite both states relying upon all three branches of government to initiate reforms, executive action was used most frequently. On occasion, the judiciary played a critical role, especially when lower branches passed judgments that provided windfall relaxation to the protective regulation. Further, the paper finds that most reforms were not structural in nature; they were merely attempts to ease the restrictions on the transfer of agricultural land. In a complete departure from past objectives, recent reforms attempted to dilute the protective framework of land leasing and change in land use regulation. It is understandable that socioeconomic and political realities have shifted and the archaic regulation may not serve its intended purpose. However, the recent reforms have failed to show a concrete new direction. Instead, they largely focused on allowing a greater transfer of land resources to industries, pushing toward more capital-intensive agriculture, and promoting digitalization of land-related governance and public service delivery.
  • Topic: Reform, Economy, Urban, Land Reform
  • Political Geography: South Asia, India
  • Author: Melissa Dalton, Hijab Shah
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: The UAE has an opportunity to professionalize the military by building its strategic planning and force development capabilities and by committing to international principles of professional military conduct and greater transparency and accountability. After two decades of concerted investment and operational experience, the United Arab Emirates (UAE) armed forces, dubbed “Little Sparta,” are now one of the leading militaries in the region. With approximately 63,000 active uniformed personnel for a population of 9.9 million (only 1.2 million of which are Emirati), allegedly augmented by foreign auxiliary and mercenary forces, the UAE has gained global attention for its role in countering Iran and violent extremist networks and for interventions in Yemen and Libya. It is one of the United States’ closest military partners in the Middle East. American scholar Kenneth Pollack assesses that, taken as a whole, the UAE’s military is the most capable among the Arab states, while there may be variance across the force.
  • Topic: Security, International Cooperation, Military Affairs, Alliance
  • Political Geography: United Arab Emirates, United States of America, Gulf Nations
  • Author: Lydia Assouad
  • Publication Date: 01-2021
  • Content Type: Working Paper
  • Institution: Carnegie Endowment for International Peace
  • Abstract: To survive its ongoing financial crisis, Lebanon needs a new economic system that addresses massive income inequality. Paired with political and institutional reform, tax reform can help. Over the past three decades, Lebanon’s ruling class—which comprises intertwined political and business elites—has run the country into the ground. To survive its ongoing accumulation of challenges, including the financial crisis that erupted in October 2019, Lebanon requires a revamped state backed by a new economic model with social justice at its core. Tax reform is central to such an endeavor—and to ensuring that the state has the means both to deliver basic services and to tackle poverty and inequality.
  • Topic: Poverty, Inequality, Economic structure, Business , Social Justice, Tax Systems, Elites
  • Political Geography: Middle East, Lebanon
  • Author: Risto Rönkkö, Stuart Rutherford, Kunal Sen
  • Publication Date: 03-2021
  • Content Type: Working Paper
  • Institution: United Nations University
  • Abstract: In this paper, we examine the economic impact of the COVID-19 pandemic on the livelihoods of the poor. We use an unusually rich data set from a ‘financial diaries’ study known as the Hrishipara Daily Diaries Project. The data set tracks the economic and financial transactions of 60 individuals and their families in a semi-rural setting in Bangladesh on a real-time basis from October 2019 to September 2020. We document individual diarists’ behavioural responses to COVID-19, which reveal the varied experiences of the poor during the pandemic. We find that the pandemic and associated government lockdowns had significant negative effects on the livelihoods of the poor in our study, with financial inflows and outflows, incomes, and household expenditures below pre-pandemic levels during the pandemic period. To cope with the pandemic, households drew down on their cash reserves at home, as well as cutting down on non-food expenditures to protect their spending on food.
  • Topic: Economics, Government, Finance, Pandemic, COVID-19
  • Political Geography: Bangladesh, South Asia