RIESGO Y DISTRIBUCION DE RIESGO EN CONCESIONES

An area of ongoing debate relates to the appropriate balance between the establishment of public policies and institutions that create an enabling environment for private sector development in general, covering enterprises of all sizes and from all industries, versus government interventions to provide direct support and subsidies to specific enterprises and industries. There is strong emerging evidence that the contribution of the public sector is likely to be more effective and less likely to distort markets or crowd-out local enterprise if governments focus on creating a suitable enabling environment and investment climate crafted to local needs, conditions and public capacities, rather than trying to deliver direct finance and business development services.

The OECD sums up this approach as follows, “The new paradigm that is emerging to provide support for private sector development is based on the concept of systemic change, changing the incentives within markets to deliver pro- poor outcomes rather than providing direct support to enterprises. Systemic change usually involves a combination of institutional change, changing the way market regulating, facilitating, and promoting organisations work (formal and informal) to provide rules of the game that facilitate and promote pro-poor outcomes; and improving access and catalysing the deepening of markets by supporting enterprises through the development of linked markets for goods and services they require.”13

The OECD adds, “As country contexts differ widely, it is difficult to arrive at a universally applicable set of policies and forms of institutions that ensure pro-poor growth. What is possible, however, is to provide an analytical framework to assess whether the conditions are in place for the private sector to deliver growth, and to identify changes to institutions and policies that would help to make growth pro- poor.”14 _{The OECD proposes a ‘Five Stage Analytical Framework’, which is}

outlined in more detail in Appendix III, and consists of the following five interlinked factors:

1. Providing incentives for entrepreneurship and investment 2. Increasing productivity, competition and innovation 3. Harnessing international economic linkages

4. Improving market access and financing 5. Reducing risk and vulnerability.

In summary, creating sound macroeconomic conditions, business regulations, capital markets and financial institutions, and investment in physical and social infrastructure are all essential roles for government to play in improving the investment climate and supporting private sector development. Different countries will have different challenges and policy areas that require particular focus, but achieving a combination of the above conditions is necessary in all countries to ensure pro-poor growth.

“The new paradigm that is emerging to provide support for private sector development is based on the concept of systemic change, changing the incentives within markets to deliver pro-poor outcomes rather than providing direct support to enterprises.”

The Commission for Africa report offers some compelling examples of the benefits of an improved investment climate, “In Uganda, which underwent widespread investment climate reforms, GDP grew by around seven per cent per year during 1993-2002, reducing the share of the population living below the poverty line from 56 per cent in 1992 to 35 per cent in 2000. In Tanzania, an improvement in the investment climate is behind the country’s fastest growth in 15 years. In Mozambique, investment climate improvements resulted in a doubling of private investment as a share of GDP between 1998 and 2002.”15

2

Supporting small enterprise development

As outlined in the previous section, the poor, and the small and microenterprises that many of them establish or work for, are often the most constrained by a bad or weak enabling environment for private sector development. They are also the most likely to benefit from improvements in this enabling environment.

Warrick Smith who led the team preparing the World Development Report 2005, comments, “The survey data show that there are some systematic differences between firms based on their size, with smaller firms generally facing the most severe constraints. Larger firms are typically better equipped to deal with distorted financial markets (due to sources of internal finance, assets to pledge as collateral and established reputations); to cope with poor infrastructure through self- provision; and to cope with potential policy uncertainty through better access to politicians and officials. One implication is that efforts to improve the overall investment climate will tend to deliver disproportionate benefits to smaller firms. This is encouraging news, particularly given the poor track-record of many schemes intended to confer special benefits on smaller firms.”16

This is an important first step in ensuring that pro-poor growth occurs. Given the central role, however, of small enterprises in providing livelihood opportunities for the poor, ongoing and targeted attention is needed by governments and donors to ensure that small enterprises are indeed benefiting and not excluded from improvements in the overall enabling environment for private sector development. Three areas of action that warrant government and donor attention are:

• Efforts to ensure that reforms to the overall investment climate or framework conditions for private sector development take into consideration the constraints and opportunities faced by small enterprises and do not create impediments to or biases against small enterprise;

• Targeted support for small enterprise development in areas such as business development services, access to finance, small enterprise cluster development and business linkage initiatives, aiming to play a facilitative or enabling role

Efforts to improve the overall investment climate will tend to deliver disproportionate benefits to smaller firms. This is encouraging news, particularly given the poor track-record of many schemes intended to confer special benefits on smaller firms.

rather than direct service delivery role – ensuring wherever possible that these initiatives are demand-driven, market-oriented and either private sector-led or public-private partnerships, and that they address the lessons of previous less- effective direct government interventions in these area; and

• Concerted efforts to engage in regular dialogue and consultations with small enterprise owners, workers and their representative bodies, to ensure that their perspectives and needs are better integrated into policy development and implementation, and not only the views of large, well-connected companies.