FIAS-supported work, managed and implemented by IFC, is organized into three strategic pillars: improving the business environment in client countries; expanding market opportunities; and strengthening firm competitiveness. Supporting these pillars are four programmatic themes that serve as guiding priorities across the portfolio: gender and inclusion; transparency and political economy; green competitiveness; and high-growth businesses.
The FIAS strategy is integrally tied to achieving the Bank Group’s Twin Goals of eliminating extreme poverty and boosting shared prosperity and to the IFC 3.0 Creating Markets Upstream strategy. The FIAS theory of change emphasizes the importance of fostering a robust private sector, which must bear the burden of creating 90 percent of the 600 million new jobs needed by 2030 to achieve those goals. FIAS-supported programs help clients at the intersection of government and private enterprise to ensure that laws, regulations, trade structures, and other elements of the business environment enable private sector growth and are not unnecessarily burdensome. FIAS aims to develop dynamic and resilient economies that promote economic inclusion through investment, job-creation, and higher productivity. As developing country economies gain a more competitive position to participate in international markets, new routes will open to lift people out of extreme poverty.
IFC Advisory Services projects supported by FIAS help lower barriers to starting a business, facilitating increased firm start-ups and competition, which in turn boosts employment. Such projects reduce firm operating costs (for example, costs associated with licenses and permits) thereby increasing firm productivity, growth, and employment. Furthermore, they support reforms to reduce investment barriers to attract both domestic and foreign investments into labor-intensive sectors. IFC coordinates FIAS-supported activities with national institutions to initiate skills development programs geared toward increasing the capabilities of all workers. FIAS projects encourage new and innovative economic activities that would benefit refugees and host communities alike.
The FIAS Strategic Pillars
An emphasis on the private sector is evident in all three FIAS strategic pillars—improve the business environment; expand market opportunities; and strengthen firm competitiveness. Although the titles are new in the current strategy cycle, much of the work in each of these areas builds upon the extensive real-world experience of FIAS-supported IFC teams. In many cases, individual programs implemented with FIAS support help achieve multiple objectives under more than one pillar. Over more than three decades of activity, FIAS has emphasized economywide reform projects aimed at improving the regulatory environment for private sector growth. Increasingly, FIAS-supported teams are working on sector-specific and firm-level projects that can help create a pipeline of projects leading to investments by the private sector and IFC—the essence of the IFC Upstream strategy.
Strategic Pillar 1: Improve the Business Environment
The objective of FIAS work under Pillar 1 is to improve regulations, reduce regulatory costs and the amount of time involved in starting and licensing businesses, and ease uncertainty for businesses and investors. Government regulations play a decisive role in creating (or hindering) a predictable and conducive framework for businesses to form, operate, and grow.
Work in this area centers on good regulatory practice, encompassing efforts to streamline regulatory processes to reduce compliance costs and discretion. FIAS encourages good regulatory design and delivery through impact assessments, notice and comment systems, and feedback loops for citizens and businesses. Good practice also involves an increased focus on regulatory transparency, the political economy of reforms, and the capacity of implementing agencies. FIAS supports a growing range of solutions in the field of sector regulations and procedures. This line of work seeks to reduce or eliminate cumbersome licensing, registration, investment approval, and sector-specific policies. The work extends to the redesign of processes at the sector level to reduce compliance costs, undue regulatory discretion, and market distortions.
Strategic Pillar 2: Expand Market Opportunities
Barriers to entering or reaching markets constitute some of the main constraints to inclusive private sector growth in developing countries. These barriers can come in the form of constraints to new overseas investment, dominant market power of a limited number of public and private players, or challenges for businesses to reach wholesalers and consumers. The ill-effects have a damaging impact on the ability of countries to link both vertically and horizontally across value chains and can constrain development and growth of women- and minority-owned businesses.
In the context of recovery from the economic impact of the COVID-19 pandemic, FIAS is supporting projects that not only create conditions for private sector growth but which lead to actual investments, particularly investments in which IFC can be a participant. This Upstream strategy is particularly relevant in FIAS priority countries—IDA, Sub-Saharan Africa, and fragile and conflict-affected states—where more active engagement by international partners is needed to spur greater private sector investment.
FIAS has an extensive track record of addressing these challenges with the work it supports on FDI regimes dating to the program’s inception in the mid-1980s. This work has expanded substantially in both sector-specific and competition policy projects. The work also entails streamlining FDI entry and defining performance-based investment incentives, strengthening investment promotion and protection frameworks and strategies, and improving outreach to promote both domestic and foreign investment in key sectors. The commitment to effective and sustainable implementation also includes a strong monitoring of investors’ operational experiences to address obstacles and encourage reinvestment.
Strategic Pillar 3: Strengthen Firm Competitiveness
More productive and competitive firms can seize opportunities in local, regional and global markets and drive economic growth. Economy-wide, market-level reforms work best when complemented with policies that help businesses invest in improved products, use climate-efficient technologies, and modernize production processes. Job opportunities will follow if labor markets can supply the necessary skills and are open to a broader slate of candidates. Effective interventions can enhance private returns, internalize social externalities, and promote firm survival and growth. Therefore, projects will entail significant new areas of work to increase the ability of businesses to improve resource efficiency, value addition, and productivity.