Defining PSD Goals, Identifying Bottlenecks to Growth, and Developing PSD Strategies. Presentation by

Transcription

1 Defining PSD Goals, Identifying Bottlenecks to Growth, and Developing PSD Strategies Presentation by Scott Jacobs Managing Director, Jacobs and Associates Under contract to the ADB 18 April 2005 The views expressed in this paper are the views of the author, and do not necessarily reflect the views or policies of the Asian Development Bank (ADB), or its Board of Directors or the governments they represent. ADB makes no representation concerning and does not guarantee the source, originality, accuracy, completeness or reliability of any statement, information, data, finding, interpretation, advice, opinion, or view presented.

2 Process of Developing Content for PSD Strategies 1. Define the PSD goals relevant to national objectives 2. Identify the most important bottlenecks to growth 3. Develop PSD solutions tailored to the national situation

3 Define PSD goals

4 Define the PSD goals relevant to national objectives Identify national development goals in existing strategies Assess how PSD can contribute to achieving national development goals Clarify existing PSD goals and their linkages to national development goals Assess adequacy and close gaps Ensure that priorities are realistic Set performance targets for goals Review and refine PSD goals through the PSD strategy

5 Identify the national development goals in existing strategies National development goals are the ends of reform. They reflect broad social and economic commitments, are macroeconomic and longer-term. higher quality of life measured by GDP/capita lower poverty rates PSD goals are the means of reaching the development goals. They are microeconomic, medium-term, and based on competitive markets. increasing exports in sector x x improving the productivity of small farmers

6 Assess how PSD can contribute to meeting national development goals National Development Goal Poverty reduction built on broad-based economic growth Possible PSD goals Increased competitiveness in export sectors such as agribusiness Increased SME start-ups Increased FDI Increased participation by informal sector in formal economy

7 Clarify existing PSD goals, their linkages to national development goals, and gaps Identify the PSD goals that support national development goals If national development goals are not supported by specific PSD goals, formulate new PSD goals for market development Avoid unrealistic listing of reforms that cannot be implemented (see 6 criteria on next slide)

8 Use 6 criteria to ensure that PSD goals are realistic 6 criteria 1. Does the PSD goal have a good track record domestically or internationally in getting results? 2. Are the preconditions or parallel reforms needed for success identified and in place? 3. Does the government have the capacities to carry out the reform? If not, is the necessary investment in government capacities already financed? 4. Does the country have natural advantages that give the PSD goal a greater chance of success? 5. Can progress be monitored? 6. Are the risks and costs involved in the reform identified and manageable?

9 Set performance targets for goals Set realistic performance targets for PSD goals, and timelines for achieving them. Setting targets is a political process as much as an analytical process, but targets should converge toward international benchmarks of performance. Adjust performance targets as constraints become clearer. Create monitoring schemes to provide feedback

10 Examples of PSD performance targets Nat l dev t goals Sustainable broadbased economic growth that reduces poverty PSD goals Indicators Performance Targets Increased competitiveness in selected sectors Growth Competitiven ess Index, Relative production efficiency -- Larger relative market share in key markets -- Relative unit value for exports increases compared to world average unit value Increased vibrancy of SME sector SME contribution to GDP # of SME startups increases -- 5% increase in tax receipts from SMEs by 2006

11 Examples of PSD performance targets Nat l dev t goals PSD goals Indicators Performance Targets Sustainable broadbased economic growth that reduces poverty Increased FDI Increased agribusiness FDI as % of GDP Value of agricultural output Closing the gap with the best performing country in the region by 25 percent by % increase over baseline in five years

12 Sequence reforms as needed Ensure that regulatory oversight and prudential controls are in place before liberalizing key markets, such as utilities. Re-structure state monopolies (unbundle( unbundle, split dominant firms) before privatizing to reduce the risks of anti-consumer market abuses after reform. Do not increase the intensity of competition in the economy without giving businesses more flexibility to compete through labor market reforms, deregulation of business controls, and reduction of barriers to entry.

13 Identify bottlenecks

14 Identifying Bottlenecks Choose the diagnostic method, starting with already available information Check the most common bottlenecks Compare, through a quick-scan, with international benchmarks to see where the country diverges most from its peers Assess relevance to PSD goals and national goals Set broad priorities among bottlenecks, recognizing they are interlinked

15 Possible diagnostic methods Review already available information Market analysis and economic diagnostics Stakeholder consultation National performance indicators for PSD International benchmarks of domestic performance

16 Review national performance against common bottlenecks High barriers to entry Unclear and unprotected property rights High-cost and low-quality infrastructure services Inadequate or ineffective rules of behavior for businesses in areas such as competition policy, corporate governance, and consumer protection Rigid labor markets Weak business capacities to manage, innovate, and improve Costly administrative formalities Poor regulatory transparency in making new regulations, in accessing existing regulations, and in enforcing regulations Low-quality business regulation

17 Example: Assessing Bottlenecks for Horticulture Exports National Development Goal: Broad-based economic growth that reduces rural poverty PSD Goal: Increase horticulture exports to maintain exports per capita Possible Bottlenecks: Weak business capacities: : Lack of quality control and training among farmers Poor Infrastructure: : Bad roads leading to airport, inaccessible during rains Business behavior: : Cartel in trucking industry is driving up transport costs Barriers to entry: : Export permits are difficult for small rural producers to obtain

18 Assess relevance to PSD goals and national goals PSD goals should be linked to explicit bottlenecks to market development. If a PSD goal has no bottleneck linked to it, further analysis is necessary. If there is no bottleneck to market development, there is no need for a PSD strategy.

19 Costly mistakes in identifying bottlenecks Incorrect problem definition. Listing reforms instead of strategizing. Unbalanced reforms to state and markets.

20 Develop solutions

21 Developing PSD Solutions Identify options for solutions to PSD bottlenecks Assess their feasibility and select the most effective solution Sequence reforms if necessary Allocate responsibilities for implementation Set performance targets to monitor progress

22 Identify options for solutions Research what other countries have done Brainstorm by expert teams Seek views of stakeholders Seek expert advice from reputable institutions

23 Example: Solving Bottlenecks to Horticulture Exports (1) PSD Goal Expand Horticulture exports Which of the Nine Bottlenecks are Relevant? Weak business capacities: Lack of quality control and training among farmers Poor Infrastructure: Bad roads leading to airport Possible Solutions Organization and training of farmers cooperatives to provide training Provision of information on international quality requirements Development of commercial agricultural extension services Public-private partnerships for road construction and maintenance

24 Example: Solving Bottlenecks to Horticulture Exports (2) PSD Goal Expand Horticulture exports Which of the Nine Bottlenecks are Relevant? Business behavior: Cartel in trucking industry is driving up transport costs Barriers to entry: Export permits are difficult for small rural producers to obtain Possible Solutions Use of competition law to break up cartel Reduction of barriers to entry into the trucking industry Eliminate export permits Re-engineer all formalities affecting small farmers to reduce costs of entry and operation

25 Assess their feasibility and select the most effective solution Consider the: Speed of solution Possibility of pilot tests Success of international experiences Cost versus benefits Risks of failure technical, political Capacities of existing institutions and skills

26 Lessons Learned PSD goals should be realistic, not long lists of hopes, but should not avoid bold strokes. Because of the complexity of markets, mistakes are easily made when identifying bottlenecks to reform. A systematic approach will reduce the risks of error A common mistake is importing solutions to apparently similar problems in other countries, without adequate assessment of national context Another mistake is identifying obvious problems, such as too many permits, rather than examining deeper causes, such as why ministries do not coordinate with each other. A third mistake is focusing on bottlenecks that can be solved fastest or with least conflict

27 For More Information Scott Jacobs at Web site: