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Indonesia's economic performance through mid-2011 has been positive. Solid growth has been accompanied by further portfolio capital and foreign direct investment inflows. Public and financial sector balance sheets remain strong. However, events over the past quarter serve as a reminder of a number of Indonesia's ongoing policy challenges. At the same time, the launch of the government's master plan 2011-2025 has focused attention on the investments and policy reforms which can help Indonesia reach its future growth potential. Finally, heightened international risk aversion originating from the Greek debt crisis, and the potential market implications of any haircut, were it to occur, are a reminder of the external shocks which could prompt reversals of short-term capital flows to Indonesia. However, events over the past quarter are a reminder of the current challenges which are faced and the need to put in place, and implement, the policies and investments necessary for Indonesia to reach its potential as a leading global growth driver of the next few decades.

This assessment of the payment systems in Thailand was undertaken in the context of the International Monetary Fund (IMF) and the World Bank Financial Sector Assessment Program (FSAP) exercise for Thailand in January 2007. It covers the Bank of Thailand Automated High-value Transfer Network (BAHTNET), which is a real time gross settlement (RTGS) system. The Bank of Thailand (BOT) conducted a comprehensive self-assessment of BAHTNET observance of the Core Principles for Systemically Important Payment Systems (CPSIPS). It was professionally done and was made available to the mission in advance. The Thai authorities were fully cooperative and all relevant documentation to fulfill the assessment of BAHTNET was provided on time and without difficulties. The logistical support and warm hospitality of the officials of the BOT are greatly appreciated.

Almost two years since his election, as Obama's popularity continues to sink, many are left wondering what went wrong with his presidency. But before that question can be answered, a more careful consideration of the situation he inherited seems in order: two unwinnable wars, the Guantánamo legal limbo, a badly damaged international reputation and an economic crisis of a magnitude not seen since the Great Depression, during which close to ten million jobs were lost. That was the state of the country when he came to power in 2008. In two years Obama has not solved any of these problems completely, but has made headway in many of them. In the context of a slow and jobless economic recovery, and faced with a vociferous opposition which has turned down every chance at bipartisan cooperation, the question should perhaps then be how Obama's level of support among the population remains this high (43%).The President still has the backing of Democratic voters, but has lost the support of Independents. Even those who would never consider abandoning him are suffering from an "enthusiasm gap" that may affect their turnout in the November 2 mid-term elections. With unemployment still hovering around 9.5% and with little prospect of change in the near future, the disillusionment of the electorate is understandable (43% support Obama today, compared with 60% in early 2009). But it is worth pondering how much of this discontent against the party in power is derived from the failure of policy and how much from the divisive political game played by the opposition.In all fairness to Obama, shrill accusations of socialism and big government were raised against him as soon as he came to power and had to immediately address the banking, mortgage and automobile meltdowns. Acerbic Republican opposition to any measure adopted by the Executive since then, has dominated the political discourse and made it almost impossible for the Administration to present evidence that, without its actions, the economic recovery would have taken even longer. It is hard to prove a negative proposition. Republicans have had a receptive audience in the low, mostly white middle class, many of who have taken to the streets under the Tea Party banner, to fight in one voice both against government "take over" of health care and (incongruously) in defense of Medicare (the government-sponsored health program for senior citizens).There is rich irony in hearing the word "socialist" hurled as the ultimate insult to a President who has bailed out the big financial institutions and the two largest automobile industries without nationalizing them, and who has signed a health care reform bill that does not include the controversial public option, which had been the centerpiece of his planned reform but was deemed too liberal by members of his own party. But reason and logic have no role to play in the polarized political atmosphere that we are experiencing today. Emotion and fear are much more productive in the views of the opposition, to help them re-take the House and perhaps even the Senate in this fall election.Timid Democrats in the House and Senate, afraid to lose their newly acquired seats in states and districts that voted for McCain in the 2008 presidential election are also abandoning the president. A posse of four or five of Senate "Blue Dog" Democrats has helped dilute the health care legislation by removing the public option from the bill, and have taken off the table legislation to curb carbon emissions and promote green energy sources. There are different hypotheses of why Obama has been unable to maintain high support rates in spite of having had important legislative victories (TARP, Stimulus spending package, extension of unemployment benefits, health care and financial reform). Former (Clinton's) Labor Secretary Robert Reich and NY Times columnist and Nobel Prize winner Paul Krugman argue that Obama's stimulus was ridiculously small, given the state of the economy in January 2009. They blame the President for not using the majorities in the House and Senate to pass bolder legislation. By compromising, Obama disappointed the liberal wing of his party, but more importantly, lost the Independents at the center, who simultaneously believed the Republican rhetoric about "Big government Socialist take over" but resented Obama's bailout of Wall Street. Contrary to the fear-mongering claims of the deficit hawks about the debt, Krugman points out that "far from fleeing US debt, investors are eagerly buying it, driving interest rates to historic lows". Reich insists that Obama missed an opportunity to push the limits of politics, establish a new framework of redistributive policies and regulations, and become a transformative president. Although this view undoubtedly has some merit, it ignores the brutal backlash against government spending that affected every Democrat in the House and Senate and made them fear for their jobs. A larger stimulus would have faced even stronger opposition from among the party's own ranks and seen some defectors. Obama is a pragmatic leader who governs as best he can, given the huge constraints of the current political context.Jay Cost from Real Politics offers a different explanation: Obama's geographic coalition was never broad enough because he failed to win the hearts and minds of middle and rural America. It is from those sectors that Independents have abandoned support for the administration in droves. In other words, Obama's major constituencies were in the major cities on the two seaboards and from the suburbs, and included Blacks, youth and university educated white professionals. Even in those cases in which they voted for Obama, white rural America, and blue collar workers never were quite convinced that he would fight for them, and the Wall Street bailout confirmed their suspicion. Underlying it all, there is, of course, the prevalent racism that permeates most sectors of American society and emerges in the form of distrust toward the Commander in Chief: Obama has to prove his loyalty to the country in ways not demanded from others. He has to pay the price of being the first Black president.A third hypothesis that is circulating among pundits is that Obama's focus on health care was misplaced, that he should have concentrated all his attention on economic recovery and job creation instead. Indeed, it was during the 2009 summer of discontent that the electorate became irreconcilably divided and that Republican-launched corrosive ads dominated the airwaves, and rumors about death panels and "pulling the plug on grandma" pervaded City Hall meetings. A general distrust of the federal government and of all incumbents inside the DC belt, while nothing new among the American electorate, re-emerged with new virulence.It is in this context that the Tea Party movement cut its teeth and started dominating the headlines. Spurred by the GOP with the intention of mobilizing the population around anti-tax, anti-federal government sentiments, the Tea-partiers launched national campaigns against all incumbents, and in the process became a voice for the profound anger, fear and frustration that the poor state of the economy and the sustained unemployment rate has caused in the population. Pleased at the frenzy stirred up by the movement, Republicans have complacently let it lead the way, exercising no restraint on their wildest propositions (see below) and allowing it to do the work for them as the voice of the opposition. This is already having unwanted consequences, as extremist Tea-party –fielded candidates from outside party ranks are challenging party insiders in gubernatorial as well as Congressional primary races.Like the eponymous rebellion that took place in Boston in 1773, the Tea Party's main philosophical thrust is against taxes, centralization of power and government overreach. Unlike it, it is also anti-immigrant. Because of the prevalent uncertainty about the economy, their discourse resonates with the electorate. To fight the federal government initiatives, they are finding their best institutional allies in the State governments, courts and legislatures. Indeed, judging by the poisonous political environment, the polarization of the electorate, and the state-based challenges to the federal government, at times it seems that only a Lincolnian figure can save America from another civil war.The so- called "States Revolution" is visible in many fronts. Five states have passed legislation against parts of the federal health reform law, and around 20 states are challenging its constitutionality through the court system. Several states legislatures are getting ready to pass laws modeled after the anti-immigration law in Arizona, which was deemed unconstitutional by a district court but has broad support in the population. It will probably end up in the Supreme Court, as challenges and counter-challenges continue. Interestingly, Obama is in fact deporting more undocumented workers than any of his predecessors, but his reform proposal would give a pathway to citizenship to these workers if they have a job, register with the US government, and pay a fine and back taxes. Immigration has been a thorny issue, with allies and foes on both sides of the aisle. After all, it was Ronald Reagan who gave amnesty to all illegal immigrants in 1986, and George Bush's proposal in 2006 was very similar to Obama's. This is hardly a philosophical issue on which the two parties diverge; it is just a populist cause that is being used by Republicans to stoke the flames of right-wing populism and racism prevalent in main sectors of the population.The backlash against undocumented workers is of such magnitude that it has come to encompass all immigrants. It has now taken the unlikely form of a movement to abolish or amend the 14th Amendment, a foundational provision dating from 1868 which grants citizenship to all born in the United States. The changing of the birth right rule is "worth considering" according to House Minority leader John Boehner (R-Ohio) because "it gives an incentive for people to come to the United States illegally to give birth here." This is outrageous pandering by the Republican Party who has always fathomed itself to be the staunchest defender of the Constitution, which they consider a sacred text to be read literally, with minimal interpretation. Such is the spirit of the times. Republican Senators Lindsay Graham and John McCain, the two most important and moderate voices on Immigration Reform have changed their positions (Mc Cain because he is facing a tough primary in his state of Arizona, against, who other, but a Tea Party candidate!) and have both agreed that it is worth a debate. This is not only unprincipled on their part, but also terrible long-term politics, since by taking this stance on immigration they are removing the possibility of regaining the support of the largest growing group of voters, namely the Hispanic or Latino population for years to come.Given the strong anti-incumbent and anti-Washington sentiment prevalent in the population, the results of the mid-term election are hard to predict because some Republicans may lose seats, too. However, the current projections of the Center for Politics at the University of Virginia give the Republicans a net win of 32 seats in the House, 7 seats in the Senate (they would need 10 to become the majority) and 6-7 governor seats. The coming mid-term election is being compared to the 1994 "revolution" led by Newt Gingrich which gave Republicans a majority in both the House and Senate. Just like Obama, Clinton was an "outsider" who was handed the presidency partly thanks to his charisma, but mainly because people were disappointed at George Bush Senior, and did not re-elect him. Clinton made health care reform the centerpiece of his first term but failed to get it through Congress. He did manage to pass a controversial crime bill that included a ban on assault weapons, which the Right traditionally opposes. He also raised taxes. Republicans attacked him with an abrasive campaign in favor of lower taxes, second amendment rights and smaller government, and won. Two years later, however, with a brighter economic outlook and a pledge to balance the budget, Clinton was re-elected.But the parallel should not be exaggerated since there are many differences as well. First, Obama did pass health care reform, and that should count have some weight among his supporters, hopefully enough weight to bring them to the polls November 2. Second, the Republican Party's image was not as tarnished in 1994 as it is today, mainly because they hadn't had a majority in Congress for a long time. A New York Times/CBS News poll this past February found that 57% of those polled has negative views of the Republicans this time. The anger is aimed at Washington as a whole and this may help Democrats. The main concern of Democrats in the House and Senate today is the demographics of mid-term elections: older (over 60) white voters, who are the core group of the Tea Party movement and the most outspoken against Obama and this Congress, are also the most likely to vote in mid-term elections. And the "enthusiasm gap" on the Left may induce many Obama supporters to stay home. On the other hand, the Democratic Party learned the lesson of 1994 and is better prepared for the fight: they have been raising money from early on, setting up voters' registration campaigns and trying to mobilize the same base that brought Obama to power two years ago. They stress his activist legislative agenda and its accomplishments: financial reform, health care, extension of unemployment benefits, an energy bill that came short of cap and trade but will meet some green energy goals. More importantly, they are framing the election as a choice between going back to the policies that got the country into the Great Recession, or moving forward with the new policies of corporate responsibility, accountability and more federal supervision of financial institutions in order to avoid similar crises.However, what is clear is that the anemic state of the economy and the high and sustained unemployment rate make all other tactics irrelevant. Uncertainty rules supreme in the minds of the electorate and with it, a fear of what the future may bring and a lack of confidence in the federal government. The Republican opposition is united and vociferous and its message simple and clear: no more taxes, no more deficits, no more government intervention, close borders to immigrants and focus on private job creation through tax cuts; what the federal government won't do, states will. The President should probably counterattack in kind and engage in this ideological battle, but he is not temperamentally suited for it. He dislikes ideological arguments because he wants to be the President of all Americans, as he pledged during his campaign. The next big decision Obama needs to make is whether to let the Bush tax cuts expire after Labor Day or to extend them for two or three years. He has announced his intention to maintain them for the middle class but to end them for the wealthiest individuals, those in the highest 2% income bracket. It would bring their income tax up from 35% to 39%, not a dramatic raise but one that will be resisted strongly by the opposition. Although Obama has a good argument to make (that the $700 billion dollars thus raised would help him reduce the deficit dramatically), there is fear in Congress Democrats that a two- week debate about tax cuts will help Republicans. In a perversely cynical way, perhaps a Republican win in the congressional elections may not be a bad thing after all, and may yet help Obama: let the Republicans make his case for him, that he himself is reluctant to make. Let them stand the public scrutiny and let the public judge if they can provide better, more novel solutions to job creation, to Afghanistan, to immigration reform. A weak performance by a Republican-dominated 112th Congress, an economy that is bound to recover as it enters its next cycle, and a Palin-Huckabee ticket may still get Obama re-elected in 2012.Senior Lecturer, Department of Political Science and Geography Director, ODU Model United Nations Program Old Dominion University, Norfolk, Virginia

Financial infrastructure is the underlying foundation of a country's financial system. It comprises all institutions, the rules, and standards of all the systems which enable financial intermediation. The quality of a country's financial infrastructure determines the efficiency of intermediation, the ability of lenders to evaluate risk and of borrowers to obtain credit, insurance, and other financial products at competitive terms. For instance, the efficient and smooth functioning of the payment, and securities settlement systems facilitates the discharge of financial obligations and the safe transfer of funds across distances and institutions; hence, it support the stability of the financial system. This technical note contains the assessment of the national payment and settlement systems (NPS) infrastructure in Montenegro. The assessment was undertaken in the context of the IMF and World Bank (WB) joint Financial Sector Assessment Program (FSAP) mission to Montenegro during September 1-15, 2015. The assessor was Gynedi Srinivas of the World Bank's Payment Systems Development Group. The assessor will like to thank the counterparts in Montenegro for their excellent cooperation and hospitality during the mission.

Inclusive innovation seeks to expand access to essential goods and services, thereby improving quality of life, and enhancing economic empowerment through knowledge creation, acquisition, adaption, absorption, and deployment efforts targeted directly at the needs of excluded populations. Inclusive innovation is of high relevance for the Chinese authorities, but the concept is new to the Chinese government from both conceptual and policy perspective. So far China has emphasized frontier innovation, yet has recognized the importance of inclusive innovation in addressing increasing disparity between the rich and poor. In China many efforts are being made in the domain of inclusive innovation, but there is no clear strategy and implementation plan. This report aims to help build awareness and set the stage for the potential implementation and operationalization of inclusive innovation policy in China and possibly in other countries. This report is presented in four Chapters and an Executive Summary. Chapter I presents the concept of inclusive innovation and why it is relevant for China. Chapter II discusses the current landscape for inclusive innovation in China. Chapter III presents international experience and examples. Chapter IV outlines some policy options for consideration by the Chinese authorities.

The Indonesia economic quarterly reports on and synthesizes the past three months' key developments in Indonesia's economy. It places them in a longer-term and global context, and assesses the implications of these developments and other changes in policy for the outlook for Indonesia's economic and social welfare. Indonesia's economic growth has so far remained resilient to the weakness in the global economy. Amidst a still uncertain outlook, Indonesia will need to prepare itself for the potential consequences of China's slowdown and additional falls in commodity prices, and for the possibility of renewed turbulence in financial and commodity markets. Continuing to strengthen the policy framework to deal with shocks and building economic resilience through improvements in the quality of spending and in the regulatory environment will be key to maintaining, and improving further, Indonesia's strong recent growth performance. Progress towards these goals could be tested as the 2014 election year approaches. Indonesia's economy maintained its robust pace of growth in the second quarter of 2012, expanding by 6.4 percent year-on-year, up slightly from 6.3 percent in the first quarter. Buoyant private consumption continued to lift domestic demand, and investment spending also increased strongly. Despite the rapid pace of economic activity, consumer price inflation has remained moderate to date. Headline CPI inflation fell back to 4.3 percent year-on-year in September after edging up to 4.6 percent in August, when it was pulled higher temporarily by the Idul Fitri holidays. Core inflation has remained stable, just above 4 percent. Indonesia's current account moved further into deficit in the second quarter of 2012. Structurally, the trend towards current account deficits reflects consistently strong domestic investment relative to the level of domestic savings. The slowdown in exports over 2012, alongside generally strong import demand, has seen the large goods trade balance surpluses of recent years narrow and this, coupled with consistent net outflows in the income and services sub-accounts, moved the overall current account into a deficit of 3.1 percent of gross domestic product (GDP) in the second quarter of 2012.

The dynamic growth of mobile communications technology is creating opportunities for economic growth, social empowerment, and grassroots innovation in developing countries. One of the areas with the greatest potential impact is in the contribution that mobile applications can make to agricultural and rural development (ARD), by providing access to information, markets, and services to millions of rural inhabitants. For both agricultural supply and demand, mobile phones can reduce waste, make delivery more efficient, and forge closer links between farmers and consumers. This report provides policymakers and development practitioners with a guide that facilitates the development and deployment of mobile applications for ARD. It also informs their understanding of the key drivers for promoting such applications and services in their countries. Using James Moore's (1996) revised definition of ecosystems: economic communities based on interacting organizations and individuals the report identifies a wide range of players in the ecosystem for m-ARD apps, such as mobile network operators, m-app (mobile applications) providers, content providers, and various types of users. M-apps are software designed to take advantage of mobile technology and can be developed for technology besides mobile phones. But mobile phones have many key advantages: affordability, wide ownership, voice communications, and instant and convenient service delivery. As a result, there has been a global explosion in the number of m-apps, facilitated by the rapid evolution of mobile networks and by the increasing functions and falling prices of mobile handsets. M-apps are markedly different in developing countries because they typically run on second-generation (2G) phones rather than smartphones, which are far more common in developed countries. The report reviews country examples and extracts policy lessons and good practices. It also presents detailed studies of cases from Kenya, Philippines, and Sri Lanka, as well as summarizes 92 case studies from Africa, Asia, and Latin America. The goal is to provide a comprehensive understanding of the development impact, ecosystem, and business models for mobile applications in ARD. The report is intended to complement the recent ICT in Agriculture eSourcebook. One of the main findings is that an enabling platform (or platforms) is probably the most important factor for the development of m-ARD apps. Platforms can facilitate interactions among ecosystem players, increase access to users, provide technical standards, and incorporate payment mechanisms.

The law and related implementing regulations that constitute the regulatory framework affecting the capital markets in Indonesia are largely consistent with the International Organization of Securities Commissions (IOSCO) Objectives and Principles of Securities Regulation. Nevertheless this assessment finds that legislative reforms and other actions that are in the process of being implemented to clarify and expand the security regulator's authority and to cure certain self-acknowledged gaps should be accelerated. Further, the assessment concludes that attention must be paid to assure that implementation of the regulatory framework results in a system that reliably detects, deters, and sanctions securities violations and reliably identifies and prevents or mitigates prudential concerns. This may require legal reforms beyond those necessary to reform the specific capital markets law, as discussed more extensively by the separate legal assessor. How significant such further reform will be to enforcement effectiveness will depend in part on the manner in which regulatory enforcement powers and authorities are augmented and enhanced under the capital markets law revision. Capital markets operations are heavily dependent on legal certainty, and in particular reliable application of contract, company, insolvency, and other legal protections.

This assessment forms part of the joint International Monetary Fund (IMF) World Bank Indonesia Financial Sector Assessment Program (FSAP) which is being undertaken during 2009-2010. The assessment, which covers the private sector equity and corporate bonds securities system's observance of the Committee on Payment and Settlement Systems / International Organization of Securities Commissions (CPSS/IOSCO) recommendations for securities settlement systems, was conducted during an ad hoc mission. The assessment focuses on two types of trades. First the clearing and settlement process is assessed as regards equity transactions traded on the stock exchange Indonesian Stock Exchange (IDX), cleared through the Clearing and Guarantee Corporation (KPEI) clearing system (e-CLEARS) and settled through the Central Securities Depository for the Stock Exchange securities (KSEI) settlement system (C-BEST). In addition, the assessment focuses on corporate bond transactions, which are traded outside the exchange and settled through the KSEI settlement system (C-BEST).

Latin America faces the twin challenges of achieving economic growth and reducing extreme inequality. Notwithstanding the heterogeneity among Latin American countries (LACs), most of them exhibit both: (i) low average Gross Domestic Product (GDP) growth; and (ii) increased inequality during the 1980s. This long period includes the 'lost decade,' when outcomes in both variables were evidently negative. These negative trends have persisted since the early 1990s, in the period of intense reforms under the Washington consensus. The development gap (difference in GDP per capita or per worker between rich countries and LACs) and the equity gap have broadened in this period. The report evaluate: (a) the macroeconomic environment in which agents make their decisions (usually in LACs, under an economic activity operating significantly below potential GDP, with outlier macro-prices, and fluctuating aggregate demand); (b) features of financial reforms (usually intensive in short-term segments and weak financing of risk and long-term financing), and their implications for capital formation and the distribution of opportunities in the domestic economy; (c) features of trade reforms (intensive in resource-based exports but low total output of tradable); and (d) the distribution of productivities, which is closely linked to the narrow space granted for the development of small and medium enterprises (SMEs).

The objective of this paper is to share the experiences and good practices of early business registry reformers who implemented web-enabled and automated electronic business registries (e-BRs). These lessons are hoped to be of help to EU New Member countries as they embark on delivering EU-conformant e-BRs. At the same time, policymakers in other developing countries may also find these lessons of use. This paper cites examples of good practices rather than best practices. As elsewhere in the development agenda, solutions that have worked well in some countries may not work in other local circumstances. In the case of e-BRs, success depends on a broader set of reforms; as will be discussed in a subsequent chapter, e-BRs require a supportive legal and regulatory infrastructure, such as electronic signature laws and document authentication. A needs assessment and analysis of the options in the local country context need to be conducted in order to find the most relevant best practice options for a specific country. Nevertheless, a number of practical good practices can be identified and are presented in this paper for consideration.