Directions in Development

Foreign direct investment (FDI) is becoming increasingly critical to the economies of developing countries, in part due to a major expansion in the scope of global value chains (GVCs), whereby lead firms outsource parts of their production and services activities across complex international networks. FDI delivers important contributions including investment, employment, and foreign exchange. However, it is FDI's spillover potential-the productivity gain that may result from the diffusion of knowledge and technology from foreign investors to local firms and workers-that is perhaps its most valuable contribution to long-run growth and development. While substantial research has been undertaken on the existence and direction of spillovers from FDI, many questions remain. Moreover, there is a need to understand better the dynamics of spillovers in certain contexts, including in low-income countries, in resource-based sectors, and in the context of GVCs. Making Foreign Direct Investment Work for Sub-Saharan Africa: Local Spillovers and Competitiveness in Global Value Chains presents the results of a groundbreaking study designed to address some of these questions, drawing on detailed field research in eight countries (including five in Sub-Saharan Africa) across three sectors: agribusiness, apparel, and mining. The book presents a summary of the results of this analytical work and discusses the implications for policy makers hoping to harness the power of FDI for greater development outcomes.

Does economic size matter for economic development outcomes? If so are current policies adequately addressing the role of size in the development process? Using working age population as a proxy for country size, Open and Nimble, systematically analyzes what makes small economies unique. Small economies are not necessarily prone to underdevelopment and in fact can achieve very high income levels. Small economies, however, do tend to be highly open to both international trade and foreign direct investment, have highly specialized export structures, and have large government expenditures relative to their Gross Domestic Product. The export structures of small economies are concentrated in a few products or services and in a small number of export destinations. In turn, this export concentration is associated with terms of trade volatility, which combined with high exposure to international trade, implies that small economies tend to face more volatility on average as external volatility permeates national economic life. Yet small economies tend to compensate for their export concentration by being nimble in the sense of being able to change their production and export structure relatively quickly over time. Moreover, limited territory plays a role in shaping how economies are affected by natural disasters, even when the probability of facing such disasters is not necessarily higher among small than among large economies. The combination of large governments with macroeconomic volatility seems to be associated with low national savings rates in small economies. This combination could be a challenge for long-term growth if productivity growth and foreign investment do not compensate for low domestic savings. The book finishes with some thoughts on how policy makers can respond to these issues through coordinated investments and regional integration efforts, as well as fiscal policy reforms aimed at both increasing public savings and conducting countercyclical fiscal policies.

The Republic of Armenia is facing a number of emerging challenges in the water sector. Though overall water resource availability in the country is good, the country's ability to monitor groundwater and surface water is deteriorating, enforcement under the existing water permit system is weak, conflicts loom over water use in the agriculturally important Ararat valley, and climate change continues to exert pressure. The performance of the irrigation, hydropower, municipal, industrial, and environment sectors depends on the judicious and coordinated wise use of the country's water resources. Recognizing the importance of integrated water resources management (IWRM), the government of Armenia has introduced over the last decade major institutional and policy reforms. These reforms provide a strong legislative foundation and framework for ensuring good management and development of water resources in the country. Despite this, further institutional strengthening is needed to fulfill the vision of this legislative framework. Toward Integrated Water Resources Management in Armenia identifies the challenges in the different water subsectors, reviews the current institutional framework and implementation of relevant water-sector policies, and makes recommendations for the next steps to strengthen water resources management in the country. The book's overall goal is to provide guidance to the government and to donors to help enhance Armenia's future water security.

Investments on the order of US$6 billion are estimated to be needed in the water sector in Nigeria in the next 10 years if the country is to achieve universal water supply coverage. This is the main finding of State Water Agencies in Nigeria: A Performance Assessment, in which the objective is to provide the government of Nigeria with a structured and coherent quantitative snapshot of the state of its urban water sector. The report focuses on water provision services from the States' Water Authorities or Water Boards (SWAs) as they are the major and only regulated agencies that provide water to the urban population. Sanitation provision is not addressed because the majority of SWAs do not provide this service to their customers. This report highlights the issues related to the performance of SWAs, tariffs levels and structures, financing mechanisms, and concerns with governance within the SWA and state governments. For example, due to accelerated urbanization and migration of the population to the large cities, the average coverage by SWAs is about 40 percent, and the average domestic water consumption was 26 liters per capita per day in 2013, well below the recommended average. The remaining majority of the population relies on alternative service providers. To the extent possible, the report also shows the impact of these institutional weaknesses on customers' costs, fiscal subsidies to the sector, and financing requirements that are needed to scale up the investment and showcase that the related operational and maintenance expenditure of the SWAs can actually be covered from the various financing sources. In fact, the coping costs of the population getting water from alternative water providers is assessed at US$700 million a year, and this number is growing. In addition, utilities get about US$100 million in operational subsidies that cover labor, electricity, and other operational costs. State Water Agencies in Nigeria: A Performance Assessment provides the government of Nigeria with a structured and coherent quantitative snapshot of the state of its urban water sector. Ultimately, this report is a first step toward performance benchmarking in Nigeria's water and sanitation sector. The findings summarized in this publication should eventually serve as a tool for utilities and their authorities and stakeholders, as well as for bilateral and multilateral donors in their efforts to monitor the performance and progress of each water provider and the sector as a whole.