I. Introduction II. The Importance of the Private Sector in Third World Development III. Nature of the Challenge to the Development of Market Economies in LDCs IV. A.I.D. Policy to Meet the Challenge V. Specific Components of the A.I.D. Policy VI. The Responsibilities of Missions and Regional Bureaus ANNEX A Wednesday, 11-Jul-2001 16:54:11 EDT

A society in which individuals have freedom of economic choice, freedom to own the means of production, freedom to compete in the market place, freedom to take economic risk for profit and freedom to receive and retain the rewards of economic decisions is a fundamental objective of the A.I.D. program in less developed countries. Such a private enterprise economy is held to be the most efficient means of achieving broad-based economic development. Private enterprises that respond to profitable opportunities in a free market produce jobs, managerial skills and economic growth. They contribute wealth to society and improve the quality of life. Moreover, significant equity objectives can be achieved when market forces operate to stimulate an economy toward full employment.

This policy paper builds upon A.I.D.'s experience in assisting private enterprise development. It also draws upon the research conducted for the President's Task Force on International Private Enterprise. The guidance in this document should help A.I.D. strengthen and more fully integrate private enterprise development into the mainstream of Agency activity, as recommended by the Task Force. This policy paper supersedes the A.I.D. policy papers entitled Private Enterprise Development and the Bureau for Private Enterprise Policy Paper (both dated May 1982). However, the goals of A.I.D.'s policy toward private enterprise remain the same. These goals are, in the first instance:

• to encourage LDCs to open their economies to a greater reliance on competitive markets and private enterprise in order to meet the basic human needs of their poor majorities through broadly-based self-sustained economic growth.

Secondly, as a corollary to the above:

• to foster the growth of productive, self-sustaining income and job producing private enterprises in developing countries.