Private sector : ideas and opportunities; a review of basic concepts and selected experience

government's emphasis on private sector initiatives in the development process, A.I.D.'s Bureau for Program and Policy Coordination has been investigating both A.I.D. and non-A.I.D. efforts to foster private enterprise as a means of increasing the resource base and momentum of development. This paper presents preliminary findings of these studies. The first section, written from the entrepreneur's perspective, examines market processes and other key factors influencing the growth of private enterprise in developing countries. Market size, specialization, and participants are considered as is the relationship between market size and enterprise size. Among the other factors discussed are political systems and practices, governmental policy interventions, infrastructure, financial systems, sociocultural practices, and the availability of capital, business expertise, and technology. In Section II, the authors examine the effectiveness, and so far as possible, costs of specific approaches to fostering private enterprise. These approaches have tended to take two forms: policy reforms and specific programs/projects to directly assist private enterprise, the latter including feasibility studies, promotion of business ventures through the conference approach, business clearinghouses, trade fairs, management training, technology transfer, the development of infrastructure and financial systems, and capital assistance. The final section examines several private sector ventures which have had visible development benefits as a basis for identifying ways for A.I.D. to assess the impacts of existing and future programs. The authors find that tools are needed for evaluating both the impact of many private enterprises on the economy as a whole and the impact of a single firm on its immediate environment. The authors conclude that (1) market mechanisms, when allowed to operate freely, will provide incentives to which the private sector will respond and (2) relatively small public sector investments can effectively stimulate private sector development resources. An 8-page bibliography, and lists of pertinent A.I.D. projects, case studies, and evaluation publications are appended.