IPPG Cluster on State-Business Relations Introduction

1. IPPG Cluster onState-Business Relations Introduction Dr Dirk Willem te Velde 15-18 December 2009 CUTS-IPPG meeting Jaipur

2. 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

3. 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)

4. 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)

5. 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.

6. 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?

7. 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.

8. Research on SBRs and growth State-Business Relations Economic Functions (theory) Forms (measuring) What creates and sustains forms of SBRs (political analysis) Effects on growth (economic analysis)

9. Research on SBRs and growth: Obtaining evidence State-Business Relations Economic Functions (theory) Forms (measuring) What creates and sustains forms of SBRs (political analysis) Effects on growth (economic analysis)

10. Context specific analysis of forms / functions of SBRs State-Business Relations Forms (measuring) Economic Functions (co-ordinating; prioritising allocative, risk reducing) What creates and sustains forms of SBRs (political analysis) Effects on growth (economic analysis)

11. 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

12. SBR case studies (Africa)Synthesising SBR Research

13. 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

14. 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

15. 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 ….

16. People to influenceExamples (1) • (From l to r) WB practice, academics and practical economists

17. People to influenceExamples (2) • Economic Councils + Central Banks + Business associations

18. THANK YOU