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What James Bond Can Teach Us About High-Performing Bureaucracies

MD Staff

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Imagine you wanted to build the most effective bureaucracy possible. Where might you look for inspiration? According to Daniel Rogger, a researcher at the World Bank, one of the best sources has been on our movie and television screens for over five decades—James Bond.

“James Bond is probably the most famous civil servant of all time,” said Rogger. “His approach toward officialdom is rooted in a strong sense of autonomy, a high mission orientation, a vibrant approach to seeking out detailed information on a case-by-case basis, and a culture of strong professional relationships.”

At a Policy Research Talk delivered earlier this year, Rogger unveiled the findings of a growing body of research and data that are helping identify how developing countries can create a bureaucracy that aspires to these kinds of ideals. Most civil servants will never chase villains across the globe like James Bond, but bureaucracies can still be places with a similar mission-driven orientation to serve the public.

Over the course of his presentation, Rogger took his audience on a whirlwind tour of the cutting edge of what researchers both inside and beyond the walls of the World Bank have learned about what shapes the functioning of bureaucracies. His findings fell under three broad headings: economics, politics, and culture.

One of the points that Rogger repeatedly drove home is that bureaucrats, like everyone else, respond to incentives—just not the usual ones. Rather, the incentives that lead to high-performing bureaucracies are influenced by the specific nature of bureaucratic work. Civil servants often carry out ambiguous tasks in uncertain environments and must multi-task across many types of work. In one study of the Ghanaian civil service, Rogger and his co-authors found that nearly 30 different government organizations work on policy, 23 work on physical infrastructure, and 20 work on permits and regulation.

The consequence of ambiguity and multi-tasking is that pay-for-performance incentives tied to easily measurable targets are likely to backfire. In a recent study of project completion rates in the Nigerian civil service, Rogger and his co-author found that the introduction of performance incentives actually slowed down project delivery, and this effect was more pronounced for those projects with higher complexity and ambiguity—for example, building a dam or a borehole.

Similarly, a study of government procurement in Russia soon to be published by London School of Economics Professor Oriana Bandiera and co-authors found that the introduction of performance incentives actually increased the prices paid by the government in the long run. In contrast, greater autonomy for bureaucrats sustainably reduced prices.

Instead of performance incentives, Rogger recommended two other types of reward systems that have been proven to improve outcomes. First, rewarding high-performing civil servants with their choice of posting or work program has been shown to improve outcomes in a number of settings. For example, in India promising postings to more desirable locations led police to increase the number and accuracy of sobriety checks. A second type of reward is the quality of management: staff are more motivated when their managers are effective, so tracking managerial practices across divisions could have substantial impacts on service delivery.

Yet Rogger pointed out that getting the right kind of incentives and people in place is not enough. Bureaucracies also operate within the constraints created by political systems. The key is for bureaucracies to remain responsive to political preferences without becoming politicized. A study of political interference in Nigeria demonstrates the trade-offs involved. In sectors where politicians have significant authority, projects are more likely to be started and completed. However, project quality also declines. Political pressure leads civil servants to shift contracts to companies preferred by the politician.

One remedy for this problem is greater transparency. In the United States, the Federal Employee Viewpoint Survey helps shine a spotlight on government departments that are underperforming. Likewise, audits in China have been shown to improve the selection of more competent mayors by utilizing more objective metrics to measure performance.

“Independent data on the public administration reduces the role for distortionary politics,” Rogger argued. Generating this independent data to improve the quality of government administration is part of the rationale for the Bureaucracy Lab that Rogger founded and co-leads.

The final piece of the bureaucratic puzzle is culture, but according to Rogger this is the area where research is still in its infancy. Creating a shared service identity with strong professional norms—think of James Bond as an exemplar of MI6—is the goal, but how best to create these norms is still an open question. Currently, a number of studies are under way in Liberia, Ghana, and Benin to find answers to this question.

“World Bank staff work hand in hand with civil servants from partner governments to end extreme poverty and build shared prosperity,” said Aart Kraay, Senior Adviser at the World Bank. “Better understanding what leads to high-performing bureaucracies is central to achieving our shared goals.”

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Canada has the most comprehensive and elaborate migration system, but some challenges remain

MD Staff

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Canada has the largest and most comprehensive and elaborate skilled labour migration system in the OECD, according to a new OECD report.

Recruiting Immigrant Workers: Canada 2019 finds that Canada admits the largest number of skilled labour migrants in the OECD. Additionally, Canada also has the most carefully designed and longest-standing skilled migration system in the OECD. It is widely perceived as a benchmark for other countries, and its success is evidenced by good integration outcomes. Canada also boasts the largest share of highly educated immigrants in the OECD as well as high levels of public acceptance of migration. In addition, it is seen as an appealing country of destination for potential migrants.

According to the OECD, Express Entry – the two-step Expression of Interest system for federal permanent labour migration introduced in 2015 – has greatly improved efficiency and the effectiveness of permanent labour migration management. It allows for ranking migrants for selection from a pool of eligible candidates. A unique feature of the Canadian model, in contrast to other selection procedures, is the degree of refinement in the ranking of candidates eligible for immigration. It considers positive interactions of skills, such as between language proficiency and the ability to transfer prior foreign work experience to the Canadian context.

The OECD report stresses that core to Canada’s success is not only its elaborate selection system, but also the comprehensive infrastructure upon which it is built, which ensures constant testing, monitoring and adaptation of its parameters. This includes a comprehensive data infrastructure, the capacity to analyse such data, and subsequent swift policy reaction to new evidence and emerging challenges. Recent reforms addressed several initial shortcomings in the Express Entry system, such as too many points being attributed for a job offer (which led to a high intake of migrants working in the hospitality sector, for instance), and which were subsequently reduced. The current selection system focuses on human capital factors such as age, language proficiency and education and is largely supply driven – meaning that most labour immigrants are admitted without a job offer – in contrast to the majority of other OECD countries.

To further strengthen the system, Canada should address some remaining inconsistencies. For instance, entry criteria to the pool are not well aligned with final selection criteria and language requirements for several groups of onshore candidates are lower than for those coming from abroad. In addition, a specific programme designed to attract tradespeople allows migration for only a few occupations and not necessarily where there are shortages, which contrasts with its original objectives. Providing for a single entry grid based on the core criteria for ultimate selection would simplify the system and ensure common standards.

The management of permanent labour migration is shared between Canada’s federal and provincial/territorial (PT) governments. The increasingly significant role played by regional governments in selection and integration has resulted in a more balanced geographic distribution of migrants across the country. PT-selected migrants have a lower skills profile than federally selected migrants but boast better initial labour market outcomes and high retention. The OECD also recommends considering a provincial temporary foreign worker pilot programme, to allow PTs to better respond to regional cyclical or seasonal labour needs that are not otherwise met, without the need to resort to permanent migration through provincial nomination.

Most of the provincial nominees – like their federally selected counterparts – settle in metropolitan and agglomeration areas, a development that Canada is currently addressing with an innovative rural community-driven programme. This includes a whole-of-family approach to integration, designed to enhance retention. Indeed, the report notes that Canada has been at the forefront of testing new, holistic approaches to managing labour migration and linking it with settlement services, especially in areas with demographic challenges.

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Maintaining Economic Stability in Lao PDR

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Economic growth in Lao PDR is projected to rebound to 6.5 percent in 2019, up from 6.3 percent in 2018. Growth is expected to be driven by the construction sector, supported by investments in large infrastructure projects, and a resilient services sector, led by wholesale and retail trade growth. Against the backdrop of challenging domestic and external environments, the Government of Lao PDR has remained committed to fiscal consolidation by tightening public expenditure and improving revenue administration, according to the latest edition of the World Bank’s Lao Economic Monitor, released today.

Fiscal consolidation is expected to result in a decline in the budget deficit to 4.3 percent of GDP in 2019 down from 4.4 percent in 2018, driven by tighter control of the public wage bill and capital spending. This is expected to keep public expenditure stable at around 20 percent of GDP in 2019. The revenue to GDP ratio is projected to improve slightly in 2019 thanks to efforts to strengthen revenue administration and the legal framework. Looking forward, public debt is expected to decline from 57.2 percent of GDP in 2018 to 55.5 percent of GDP in 2021. The outlook until 2021 is subject to increasing downside risks.

Strengthening revenue collection is important to create fiscal space and reduce the burden of public debt,” said Nicola Pontara, World Bank Country Manager for Lao PDR. “Looking forward, it will be important to improve the business environment to support private sector development, including the growth of small and medium enterprises. These measures can contribute to maintaining a stable macroeconomic environment, promoting job creation and reducing poverty and inequality.”

The report includes a thematic section that summarizes the perceptions of small and medium enterprises (SMEs) on the business environment, based on the data of the World Bank Enterprise Survey. The key constraints reported by SMEs include access to finance, competition with informal firms – such as those that are not registered and do not comply with regulations – and electricity outages. The report maintains that strengthening the performance of SMEs can improve the quality of jobs, raise incomes, and contribute to the greater well-being of the Lao people.

The Lao Economic Monitor is published twice yearly by the World Bank Office in Lao PDR.

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Economic woes hold sway over geopolitics

MD Staff

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While geopolitical tensions in the Middle East Gulf remain high, with US sanctions recently extended to more Iranian officials and a Chinese oil importer, as well as another tanker seizure, oil prices (Brent) have eased back from the most recent high of $67/bbl. Shipping operations are at normal levels, albeit with higher insurance costs. The messages from various parties that vessels will be protected to the greatest extent possible, and the IEA’s recent statement that it is closely monitoring the oil security position in the Strait of Hormuz will have provided some reassurance.

There have been concerns about the health of the global economy expressed in recent editions of this Report and shown by reduced expectations for oil demand growth. Now, the situation is becoming even more uncertain: the US-China trade dispute remains unresolved and in September new tariffs are due to be imposed. Tension between the two has increased further this week, reflected in heavy falls for stock and commodity markets. Oil prices have been caught up in the retreat, falling to below $57/bbl earlier this week. In this Report, we took into account the International Monetary Fund’s recent downgrading of the economic outlook: they reduced by 0.1 percentage points for both 2019 and 2020 their forecast for global GDP growth to 3.2% and 3.5%, respectively.

Oil demand growth estimates have already been cut back sharply: in 1H19, we saw an increase of only 0.6 mb/d, with China the sole source of significant growth at 0.5 mb/d. Two other major markets, India and the United States, both saw demand rise by only 0.1 mb/d. For the OECD as a whole, demand has fallen for three successive quarters. In this Report, growth estimates for 2019 and 2020 have been revised down by 0.1 mb/d to 1.1 mb/d and 1.3 mb/d, respectively. There have been minor upward revisions to baseline data for 2018 and 2019 but our total number for 2019 demand is unchanged at 100.4 mb/d, incorporating a modest upgrade to our estimate for 1Q19 offset by a decrease for 3Q19. The outlook is fragile with a greater likelihood of a downward revision than an upward one.

In the meantime, the short term market balance has been tightened slightly by the reduction in supply from OPEC countries. Production fell in July by 0.2 mb/d, and it was backed up by additional cuts of 0.1 mb/d by the ten non-OPEC countries included in the OPEC+ agreement. In a clear sign of its determination to support market re-balancing, Saudi Arabia’s production was 0.7 mb/d lower than the level allowed by the output agreement. If the July level of OPEC crude oil production at 29.7 mb/d is maintained through 2019, the implied stock draw in 2H19 is 0.7 mb/d, helped also by a slower rate of non-OPEC production growth. However, this is a temporary phenomenon because our outlook for very strong non-OPEC production growth next year is unaltered at 2.2 mb/d. Under our current assumptions, in 2020, the oil market will be well supplied.

IEA

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