|
|
|
|
|
|
|
|
|
|
  |
 |
  |
Private Enterprise Development
November 1984
>> This Is USAID >> USAID Policy Papers >> Private Enterprise Development
[Download original document] IV. A.I.D. Policy to Meet the Challenge
Statement of General Policy
A.I.D. assistance to an LDC should encourage social and economic development that promotes movement toward a democratic, free market society. It is A.I.D.'s view that such societies are most efficient for generating broad based, sustained economic growth and social progress. A.I.D. should program its resources in support of LDC performance towards this objective.
A.I.D.'s private enterprise policy is intimately related to the need to conduct our programs in an environment of policy dialogue with the host country. The essence of this policy dialogue should be to deal with the country's development strategy and related policies as they affect the operation and growth of free markets and private entrepreneurship. However, policy dialogue leading to policy reforms which encourage LDC private enterprise development may not be sufficient to achieve the desired objective. Therefore, A.I.D. should also engage in specific direct program actions to eliminate legal, regulatory and other constraints to private enterprise development, and to assist and promote private enterprises. In this regard, A.I.D. personnel who plan and implement such programs should endeavor to learn as much about the indigenous private sector in their host country as they do about the operation of the ministries and parastatals which are responsible for or involved in the principal sectors of the Country Program Strategy.
The overriding intent of A.I.D.'s private enterprise policy is to promote the establishment of a climate conducive to LDC private sector activity; it is not intended primarily to finance the establishment of individual business entities per se. The two-pronged objective, to reach the ultimate goal of growth, is the establishment of viable, competitive markets and the expansion of private enterprise in LDCs. These objectives may not be met by establishment of a particular firm unless the establishment of the firm leads directly towards the development of a competitive market in the LDC or becomes a demonstration project that can readily attract private replication.
A.I.D.'s preference is to build up and rely on the indigenous private sector for the long run economic development of the LDC, rather than to assist continued reliance on parastatals. A.I.D. has a particular interest in exposing productive activities to market forces rather than subjecting them to administrative plans. A.I.D. has a particular interest in reducing and eliminating subsidies. Finally, A.I.D. has an overriding interest in ensuring that activities carried out to develop competitive markets and private entrepreneurship can be shown to benefit A.I.D.'s target group as defined in the FAA.
A.I.D.'s promotion of free markets and the private sector should not be confused with monopoly enterprises, oligarchy or "crony capitalism", which have little to do with the free market. A.I.D.'s effort to encourage competition and entrepreneurial activity is as much a challenge to the limited capitalism extant in some countries as it is to statist economies.
There are no restrictions on the types of funds or modes of assistance applicable to the pursuit of the private enterprise objectives. ESF, DA and PL 480 loans or grants are all appropriate ways to support private enterprise development. Forms of assistance such as studies, short or long term technical advisors, commodities, training or resource transfers can be used either as components of project or non-project assistance in exchange for appropriate policy changes or for support of country performance in areas of significance to private enterprise development. Local currency generated from non-project assistance can also be programmed effectively in support of private enterprise development.
Assistance to promote competitive market conditions and indigenous private enterprises should not be considered as a separate portfolio of activity independent of other sectors of interest to the country assistance strategy, such as agriculture, health, education, etc. The promotion of a democratic, free market economy should underpin and be incorporated in all aspects of A.I.D.'s country programs.
A.I.D.'s private enterprise initiative is directed at the development of the LDC's private sector. A.I.D. will utilize the U.S. private sector to help it achieve this objective. However, the use of U.S. private sector firms to provide technical assistance, commodities and other services does not constitute in and of itself an act which fulfills the intent of this private enterprise policy. In accordance with the F.A.A., the use of U.S. firms on projects to the maximum extent, possible is standard operating procedure for all projects. Skills, commodities and services available in the U.S. private sector are valuable to help solve almost all of the problems confronting development. However, their use on a project does not automatically mean that the outcome of the project will be the direct improvement of the LDC private sector or the furtherance of an open, free market economy. Therefore, the mere use of a U.S. private firm should not be construed to mean that the project is a private enterprise promotion project in the sense of meeting A.I.D.'s policy objectives.
Similarly, the implementation of the private enterprise initiative need not be exclusively through firms in the U.S. private sector. While such firms are often the most appropriate source of expertise, U.S. universities, PVO's and government agencies may also be suitable resources particularly in helping LDCs establish a policy environment conducive to the growth of indigenous private enterprises.
As LDCs develop more market oriented and open economies, U.S. private enterprise should benefit from new markets for inputs to higher levels of LDC economic activity and more opportunities to enter into mutually profitable business relationships with LDC entrepreneurs.
 |
|||
Last Updated on: July 11, 2001 |
