Asia

'Aha' moments: On the ground in Kazakhstan with the private sector

By Yomna Mohei Eldin

Kazakhstan is one of the least densely populated countries in the world. It has an area roughly equal to that of all of Western Europe and a population of 19 million – around that of the Netherlands. Kazakhstan became Independent in 1991 after the fall of the Soviet Union and shortly thereafter experienced an oil boom. The global commodity super-cycle ended in 2014, and oil prices fell. Kazakhstan’s unique socioeconomic history and its vulnerability to commodity price shocks...

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Reflections on Decarbonization: Wyoming vs. Japan

By Ryosuke Shimizu

This summer, as a Growth Lab intern, I conducted research on decarbonization in the United States. To gain a better understanding of this topic, I worked with an economist at the Center for Business and Economic Analysis (CBEA) at the University of Wyoming in Laramie. CBEA's primary task is to work with other departments and state agencies to conduct economic assessments of industrial projects in Wyoming. Most...

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Hausmann, R., Schetter, U. & Yildirim, M.A., 2022. On the Design of Effective Sanctions: The Case of Bans on Exports to Russia.Abstract
We analyze the effects of bans on exports at the level of 5,000 products and show how our results can inform economic sanctions against Russia after its invasion of Ukraine. We begin with characterizing export restrictions imposed by the EU and the US until mid May 2022. We then propose a theoretically-grounded criterion for targeting export bans at the 6-digit HS level. Our results show that the cost to Russia are highly convex in the market share of the sanctioning parties, i.e., there are large benefits from coordinating export bans among a broad coalition of countries. Applying our results to Russia, we find that sanctions imposed by the EU and the US are not systematically related to our arguments once we condition on Russia’s total imports of a product from participating countries. Quantitative evaluations of the export bans show (i) that they are very effective with the welfare loss typically ∼100 times larger for Russia than for the sanctioners. (ii) Improved coordination of the sanctions and targeting sanctions based on our criterion allows to increase the costs to Russia by about 60% with little to no extra cost to the sanctioners. (iii) There is scope for increasing the cost to Russia further by expanding the set of sanctioned products.

Student Stories: Tackling Transportation Infrastructure in Kazakhstan

Yomna Mohei EldinYomna Mohei Eldin is a second-year MPA/ID student at Harvard Kennedy School. Se was accepted into the Growth Lab's 2022 Summer Internship Program and contributed to our policy engagement in Kazakhstan where our research aims to identify and prioritize investment opportunities and policy options to drive sustainable economic growth and diversification.... Read more about Student Stories: Tackling Transportation Infrastructure in Kazakhstan

Endowment Structure, property rights and reforms of large state-owned enterprises (SOEs) in China: Past, present and future
Liu, X., Shen, J.H. & Deng, K., 2022. Endowment Structure, property rights and reforms of large state-owned enterprises (SOEs) in China: Past, present and future. Structural Change and Economic Dynamics. Publisher's VersionAbstract
Based on the criteria of the factor endowment structure of state-owned enterprise (SOE) sectors in China between 1980 and 2018, this paper rationalizes the classified reforming of China's state sectors by constructing a Nash bargaining model to capture the dynamics of ownership restructuring, and the reduction process of policy burden on SOEs. We reveal that the interplay between policy burden bared by SOEs and the ownership restructuring process largely depends upon their factor intensities since the reform period in the 1980s. Our model identifies two Ownership Reform Irrelevance Points (ORIP), which serve as the benchmark for the dynamics of the ownership restructuring process of China's large SOEs, which saw them move from ‘mixed-ownership’ to ‘privatization’. ORIPs demonstrate the need for a reduction in social policy burdens with regards to the state sector's comparative advantage of factor endowment structure through SOE ownership restructuring. This study theoretically analyzes existing literatures on the classified reforms of China's state sectors from 1978 to 2018. This study is the first to base such an analysis on the criteria of factor endowment structure focusing on the connection between the policy burdens bared by SOEs and their ownership restructuring process.
Hausmann, R., et al., 2022. Cutting Putin’s Energy Rent: ‘Smart Sanctioning’ Russian Oil and Gas.Abstract

Following the Russian aggression against Ukraine, major sanctions have been imposed by Western countries, most notably with the aim of limiting Russia’s access to hard international currency. However, Russia remains the world’s first exporter of oil and gas, and at current energy prices this provides large hard currency revenues. As the war continues, European governments are under increased pressure to scale-up their energy sanctions, following measures taken by the United States, the United Kingdom, Canada and Australia. This piece argues that given the inelasticity of Russia’s oil and gas supply, for Europe the most efficient way to sanction Russian energy would not be an embargo, but the introduction of an import tariff that can be used flexibly to control the degree of economic pressure on Russia.

E-Letter in Science: How to weaken Russian oil and gas strength

Hausmann, R., et al., 2011. Growth and Competitiveness in Kazakhstan: Issues and Priorities in the Areas of Macroeconomic, Industrial, Trade and Institutional Development Policies.Abstract

Kazakhstan has achieved many of its goals and faces enormous opportunities. It has been able to transform itself into a market economy, thus unleashing the productive capacity of its citizens and creating the conditions for the country to benefit from international trade and investment. In addition, it has discovered large quantities of oil reserves that will allow it to sustain a tripling of oil production in the next two decades.

Under these conditions, the recent performance of the economy has been characterized by rapid growth with declining unemployment. The economy has been propped up by increased fiscal spending and by private investment. Macroeconomic management has been prudent in the sense that inflation has been kept low, the government has accumulated significant fiscal savings in the National Fund and the Central Bank has built up a significant stock of international reserves. The question is how to make this situation last over the medium and long term and how to make the economy resilient to the shocks that may come.

This report is a collection of policy memos that deal with the choices the government faces going forward in the broad area of macroeconomic policies, including fiscal policy and institutions, monetary and exchange rate arrangements and policies, financial policies, industrial policy, trade policy and broad issues in institutional development.

Sustainable and Inclusive Growth in Kazakhstan

The aim of the project is to advance research towards proposing policies to boost economic growth and development in Kazakhstan, with particular emphasis on reducing socioeconomic inequalities.

Andrews, M., et al., 2017. Learning to Target for Economic Diversification: PDIA in Sri Lanka.Abstract

Many countries, like Sri Lanka, are trying to diversify their economies but often lack the capabilities to lead diversification programs. One of these capabilities relates to targeting new sectors to promote and pursue through a diversification policy: countries know they are ‘doomed to choose’ sectors to target,1 but lack effective capabilities to do the targeting. This paper narrates a recent (and ongoing) initiative to establish this kind of capability in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities. The paper tells the story of this process, providing documented evidence of the progress over time and describing the thinking behind the PDIA process. It shows how a reliable targeting mechanism can emerge in a reasonably limited period, when a committed team of public officials are effectively authorized and engaged. The paper will be of particular interest to those thinking about targeting for diversification and to those interested in processes (like PDIA) which are focused on building state capability and fostering policy implementation in public contexts.

1 The term here comes from Hausmann, R. and Rodrik, D. 2006. Doomed to Choose: Industrial Policy as Predicament. Draft.

Andrews, M., et al., 2017. Learning to Engage New Investors for Economic Diversification: PDIA in Action in Sri Lanka.Abstract
Many countries, like Sri Lanka, are trying to diversify their economies but often lack thecapabilities to lead diversification programs. One of these capabilities relates to engaging new investors—in new sectors—to bring their FDI and know-how to a new country and kick-start new sources of activity. This paper narrates a recent (and ongoing) initiative to establish this kind of capability in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities over a six-month period. The paper tells the story of this process, providing documented evidence of the progress over time (and describing thinking behind the PDIA process as well). It shows how an investment engagement approach can emerge in a reasonably limited period, when a committed team of public officials are effectively authorized and engaged. The paper will be of particular interest to those thinking about investor engagement challenges and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation in public contexts.
Andrews, M., et al., 2017. Learning to Improve the Investment Climate for Economic Diversification: PDIA in Action in Sri Lanka.Abstract
Many countries, like Sri Lanka, are trying to diversify their economies but often lack thecapabilities to lead diversification programs. One of these capabilities relates to preparing the investment climate in the country. Many governments tackle this issue by trying to improve their scores on ‘Doing Business Indicators’ which measure performance on general factors affecting business globally (like how long it takes to open a business or pay taxes). Beyond these common indicators, however, investors face context specific challenges when working in countries like Sri Lanka that are not addressed in global indicators. Governments often lack the capabilities to identify and resolve such issues. This paper narrates a recent initiative to establish these capabilities in Sri Lanka. The initiative adopted a Problem Driven Iterative Adaptation (PDIA) process, where a team of Sri Lankan officials worked with Harvard Center for International Development (CID) facilitators to build capabilities over a six-month period. The paper tells the story of this process, providing documented evidence of the progress over time (and describing thinking behind the PDIA process as well). The paper will be of interest to those thinking about the challenges associated with creating a climate that is investor or business friendly and to those interested in processes (like PDIA) focused on building state capability and fostering policy implementation.

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