Blog of the Day

Running a Hospital- President and CEO of Beth Israel Deaconess Medical Center in Boston

Back to Basics in SOE reform

Turnaround Of Indian Railways

Indian Railways is the worlds largest employer and one of the biggest and busiest rail networks in the world, carrying some 17 million people and more than one million tonnes of freight daily. It was, however, until very recently, a loss-making organisation heading for bankruptcy. Starting his term in 2004 with a budget of just $200 million with which to save the national institution, Indian Railways Minister, Lalu Prasad engineered a dramatic turnaround. In 2007, Indian Railways revenues amounted to $6 billion. This impressive success story has also been featured in the textbooks of prestigious academic institutes worldwide as a case study. Minister Lalu Prasad is a key ally of India's governing coalition led by the Congress party. He was also the former Chief Minister of the state of Bihar which his Rashtriya Janata Dal party governed for 13 years until 2005.

Dept of Why Not?

Now the cellphone industry is trying its own approach. The theory is that you will browse for deals when you are at the store, or maybe receive deal alerts when you are nearby, and simply use the phone as a virtual coupon when you are at the cashier.

The idea has lots of promise. Whether it’s worth your while depends on where you live, how much you use the products featured by these coupon services and how much work you’re willing to do for a bargain.

Of the services emerging in the nascent cellular-coupon industry, two — Cellfire and 8Coupons — offer good examples of the state of the art. Both are free, and will work on virtually any phone, but the experience can be disappointing if you use one of the services in the wrong place.

-Cents-Off Coupons and Other Special Deals, via Your Cellphone

India book recommendation

Imagining India: Ideas for the new century, Nandan Nilekani

Dept. of Good Practice in Doing Business

An effective way to address concerns of the private sector in Cambodia

The government of Cambodia has an interesting and innovative method of identifying issues of concern from the private sector and addressing them– directly communicating through the Government Private Sector Forum...

The forum is important because of the resulting decisions. The World Bank Group’s International Finance Corporation (IFC), which provides financial and technical support for the secretariat of the forum, conducted an evaluation (pdf) last year that showed very high returns to their support. It is also important because of the forum it provides for discussion. In one instance last week, there was a healthy exchange of ideas about the marked slowdown of economic growth in Cambodia. I think the meeting is also important for the private sector to hold the government accountable for its past decisions and to work toward a better investment climate.

Kyrgyz - Investment Climate

Kyrgyz Republic: Preparing the Investment Climate Improvement Program

Europe progresses towards a free market

Starting in July, when the changes come into force, standards for 26 products, ranging from peas to plums, will disappear altogether. European shoppers will then be able to chose their produce whatever its appearance.

For 10 other types of fruit and vegetables, including apples, citrus fruit, peaches, pears, strawberries and tomatoes, shape standards will remain. However, items that do not meet European norms will still be allowed onto the market providing they are marked as being sub-standard or intended for cooking or processing.

“This marks a new dawn for the curvy cucumber and the knobbly carrot,” said Mariann Fischer Boel, European Commissioner for Agriculture, who argued that regulations were better left to market operators.

-Europe Welcomes Abnormal Veggies

Another Index- Financial development index

America and Britain have the most developed financial systems in the world, according to the World Economic Forum, a think-tank. Its inaugural Financial Development Report ranks 52 countries according to the strength of their financial markets, and the depth and breadth of access to capital and financial services. This wide-ranging index takes into account the quality of each country’s financial laws and regulations, its business environment, and the likelihood of a financial crisis, among other things. Rich countries scored well, whereas Latin America and Eastern Europe did poorly. Most countries had uneven performance: only Germany, America and Britain scored well across all categories.

Related;
Why is the US ranked #1 in spite of its serious financial instability and crisis?-Roubini;

The issue of financial stability is an important one that I flesh out in more detail in a chapter of the report titled “Financial Crises, Financial Stability, and Reform: Supervision and Regulation of the Financial System in a World of Financial Globalization”. This chapter analyzes in detail the episodes of financial crisis in emerging market economies and advanced economy; discusses the causes and consequences of such crisis; measures the economic and fiscal costs of such crises; discusses the debate on whether monetary and credit policy should target asset prices and asset bubbles; studies the weaknesses of financial regulation and supervision in advanced economies financial systems that led to the recent crises; and finally considers eleven separate key issues in the reform of the regulation and supervision of financial institutions in a world of financial globalization that are necessary to prevent future crisis and make them less virulent.

The eleven issues that are key in reforming financial regulation and supervision are: the distorted compensation system of bankers/traders and the related agency problems between financial institutions shareholders and their managers; the flaws of the originate and distribute securitization model; regulatory arbitrage and the instability of the shadow banking system given its reliance on short term liquid financing, high leverage and long term illiquid lending; the weaknesses of self-regulation and market discipline and the need of greater rules-based regulation; pro-cyclical capital requirements and other issues with the Basel II capital requirements; the distorted incentives of credit rating agencies; asset valuation and fair value accounting in a world where assets can be highly illiquid and hard to price; the lack of transparency in financial markets; the inadequate regulatory regime; the lack of international coordination of regulatory policies; and the issue of who will regulate the regulators, i.e. how to avoid the regulatory capture by the financial industry of the regulators and supervisors of financial institutions.

The paradox of the US and UK being ranked top at a time when there is significant turmoil, weakness and vulnerabilities in their financial systems can be explained as follows:

There is a tradeoff between greater financial innovation (that is beneficial to develop more sophisticated financial instruments allow better allocation of savings to investment and better risk diversification) and financial risk and instability that may increase if such innovation does not occur in the appropriate regulatory and supervisory regime. A country may be very financial stable with little risk of a financial/banking crisis but if this stability is the result of excessive regulation that foster little financial innovation, little competition and efficiency in financial markets and institution such financial stability will come at the cost of poorer financial intermediation that is not beneficial to long term economic growth and performance. So, excessively stable financial regimes are not necessarily ideal. Conversely, if financial innovation is excessive and occurs in a weak regulatory framework financial markets may be much more sophisticated but the risk of instability is also greater.

Doing Business beauty contest

Doing Business 2009 - Five years of reforms;

This year's top reformer is...drum roll please...Azerbaijan! Azerbaijan improved on 7 out of 10 of the indicators tracked by DB and moved up 64 slots in the overall rankings