IPPG Cluster onState-Business Relations

Introduction

Dr Dirk Willem te Velde

15-18 December 2009

CUTS-IPPG meeting Jaipur

Introduction

IPPG combines various disciplines including economics and political science.

State-Business Relations emerged early on as an IPPG issue relevant to various disciplines.

Exploratory studies, research in India and African countries, policy engagement

SBRs and institutions

The study of state-business relations (SBRs) lies at the heart of IPPG. SBRs reflect economic and political institutions.

Economic: SBRs embody formal and informal rules and regulations that are designed to perform economic functions.

Political: SBRs reflect the way in which power amongst different agents, elites and coalitions of interest are shared.

Respect disciplines, test the boundaries and cross-fertilise (e.g. political science essential for understanding nature of SBRs, economics tells us to understand why it matters for development)

Theoretical underpinnings of SBRs

Markets fail to allocate resources efficiently in theory and practice (market failures)

But governments may fail to overcome market failures (governance failures).

Appropriate institutions and co-ordination mechanisms (SBRs) can help to address market failures without leading to failed interventions (also refer to Williamson, Ostrom)

Functional approach (better investment climate, better allocation of scarce resources, reducing risk providing information)

Objectives of SBR cluster

understand the nature of formal and informal interactions between the state and business;

understand the effects of different types of SBRs on (patterns of) economic growth;

understand conditioning factors affecting this relationship.

Policy relevance

Inform technocratic economists (and those they influence) using evidence that institutions matter – non-trivial, incl. language (not only which policy matter, but also how such policies are made).

Inform political scientists that power can be channelled for growth enhancing effects

How can developing countries build institutions that sustain (PP) growth. How can they be incentivised to support state-business relations that matter.

How can donors help: e.g. can they support state-business relations, and if so how?

Hypotheses

It is possible to identify (PP) growth enhancing characteristics and functions of SBRs (at country level and perhaps beyond).

It is possible to identify what drives effective SBR.

It is possible to inform policy makers about effective SBRs.

Research on SBRs and growth

State-Business Relations

Forms(measuring)

Economic Functions(theory)

Effects on growth(economic analysis)

What creates and sustains forms of SBRs(political analysis)

Research on SBRs and growth: Obtaining evidence

State-Business Relations

Forms(measuring)

Economic Functions(theory)

Effects on growth(economic analysis)

What creates and sustains forms of SBRs(political analysis)

Context specific analysis of forms / functions of SBRs

State-Business Relations

Forms(measuring)

Economic Functions(co-ordinating; prioritisingallocative, risk reducing)

Effects on growth(economic analysis)

What creates and sustains forms of SBRs(political analysis)

Research questions in country context

Examine determinants of SBRs Describe formal and informal institutional and

organizational forms in both public and private sectors and the relations between them

Discuss economic functions of SBRs in the specific country context

Discuss specific instances of effective SBRs, or ineffective SBRs

Provide policy relevant conclusions

SBR case studies (Africa)Synthesising SBR Research

Drivers Describe/ measure

Economic functions

Effects on growth performance

GhanaHistorical institutionalist inductive theories

Existing data sets Micro econometrics

MauritiusAnalytical and historical account Survey

Effect SBR on budget policy proposals

Micro econometrics / firm performance / macro economics

South Africa

Tracing history of state- business organisation, explore nature of sub-national SBR

Effect SBR on trade and industrila policy

Zambia

Effect SBR on allocation of pro poor public spending

Emerging issues

SBRs matter. Mauritius (Rojid et. al .): Joint Economic Council is influential private sector actor in SBRs in Mauritius; Measured SBR leads to higher growth (1970-2005). How? E.g. suggested budget proposals for better industrial policies are frequently taken over by government budgets.

SBR cannot simply be put in place. South Africa (Natrass, Seekings): Nedlac did not provide a real consensus seeking forum, due to weaknesses in state, although some success in industrial policy.

SBRs do perform useful functions at macro level. Zambia (Bwalyas, et al.): analysis of new, transparent mechanism to channel budget proposals suggest that business organisations / actors have influenced budget outcomes (esp using civil servants), more than other stakeholders.

And at micro level. Across Africa (Qureshi and Te Velde): business membership leads to better firm performance by reducing policy uncertainty and lobbying, but individual lobbying remains important!

There is more going on than measured SBRs. Ghana (Ackah et al.): more developed social networks (politicians, civil servants) of firms (#256) lead to better firm performance

Who do we want to tell what?

Academics – new way of looking at (PP) growth (empirical examinations rooted in theory)

Government policy makers – engaging business is useful for development

Business policy makers – engaging in a well informed democratic conversation with government helps

Funders / donors – it takes a long time

Why does it matter ?Some practical examples

GFC hit countries differently (exposure), but ultimately the vulnerability also depends on resilience which is conditioned by effective SBRs

Uganda vs Tanzania: Tanzania instituted a task force to gather information and acted; Uganda was / is slow to progress

Mauritius vs St Lucia: Mauritius set up a task force to address crisis and acted early on (institutionalised); St Lucia did not and faced protests.

Zambia’s and Kenya’s task force have yet to report or share info; mining disputes and kneejerk policy reactions ….

People to influenceExamples (1)

(From l to r) WB practice, academics and practical economists

People to influenceExamples (2)

Economic Councils + Central Banks + Business associations

THANK YOU