IPPG Cluster on State-Business Relations Introduction Dr Dirk Willem te Velde 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; prioritising allocative, 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 Ghana Historical institutionalist inductive theories Existing data setsMicro econometrics Mauritius Analytical and historical accountSurvey 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 ( ). 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 influence Examples (1) (From l to r) WB practice, academics and practical economists

People to influence Examples (2) Economic Councils + Central Banks + Business associations

THANK YOU