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Reforming the investment climate : lessons for practitioners

  • Kikeri, Sunita
  • Kenyon,Thomas
  • Palmade, Vincent
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    Most people agree that a good investment climate is essential for growth and poverty reduction. Less clear is how to achieve it. Many reforms are complex, involving more than technical design and content. They are both political, facing opposition from organized and powerful groups-and institutionally demanding, cutting across different departments and levels of government. Reform thus requires paying as much attention to understanding the politics and institutional dimensions as to policy substance, which is the goal of this paper. Drawing from more than 25 case studies, it shows that there is no single recipe or"manual"for reform, given diverse contexts and serendipity in any reform effort. But three broad lessons emerge. The first is to recognize and seize opportunities for reform. Crisis and new governments are important catalysts, but so is the competition generated by trade integration and new benchmarking information. The second is to invest early in the politics of reform. Central to this process is using education and persuasion strategies to gain wider acceptance and neutralize opponents. Pilot programs can be valuable for demonstrating the benefits and feasibility of change. And the third is to pay greater attention to implementation and monitoring. This does not require full scale public management reforms. Reformers can draw on private sector change management techniques to revitalize public institutions responsible for implementation. Given the cross-cutting nature of reform, new oversight mechanisms may be needed to monitor and sustain reform. The paper concludes with an emerging checklist for reformers and identifies areas for future work.

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    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3986.

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    Date of creation: 01 Aug 2006
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    Handle: RePEc:wbk:wbrwps:3986
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    1. Barbara Nunberg & Amanda Green, 2004. "Operationalizing Political Analysis : The Expected Utility Stakeholder Model and Governance Reforms," World Bank Other Operational Studies 11248, The World Bank.
    2. Lewis, William W., 2004. "The Power of Productivity," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226476766.
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    4. Fernando Salas & Sunita Kikeri, 2005. "Regulatory Reform : Institution Building - Lessons from Mexico," World Bank Other Operational Studies 11234, The World Bank.
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    9. Klaus Deininger, 2003. "Land Policies for Growth and Poverty Reduction," World Bank Publications, The World Bank, number 15125.
    10. Dani Rodrik, 1996. "Understanding Economic Policy Reform," Journal of Economic Literature, American Economic Association, vol. 34(1), pages 9-41, March.
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    12. Keefer, Philip & Khemani, Stuti, 2003. "Democracy, public expenditures, and the poor," Policy Research Working Paper Series 3164, The World Bank.
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