| 4.1 |
The conventional wisdom regarding structural adjustment is
that ‘get your prices right’ is both a necessary and sufficient condition for
growth. This report takes the view that ‘getting prices right’ is necessary but
not sufficient. It suggests that some interventions are also required. |
| 4.2 |
These can be divided into two categories, functional and
selective. The former are those interventions which address market failures without
favouring any specific activity (e.g. provision of infrastructure, institutional capacity,
education), whereas the latter ‘are designed to favour individual activities or
groups of activities in order to remedy specific failures or externalities that would lead
to sub-optimal resource allocation either in a static or dynamic sense’ (Lall, 1994b,
p.65). Selective interventions address a market failure concerning the creation of a
dynamic capacity within an economy, in particular information and technology upgrading and
skills formation. |
| 4.3 |
Governments also have important roles to play in the
co-ordination and timing of policies. This ensures that the skill creation, technological
capacity and know-how are developed in line with requirements. However, ‘government
failure’ exists in developing countries, and assistance is required to help overcome
the resulting problems. |
| 4.4 |
An example of this approach is seen in Taiwan ROC where the
complementarities between market mechanisms and government interventions have been very
successfully exploited. The case study of Taiwan provides many important lessons for other
developing countries. |
| 4.5 |
Increased globalisation means that growth must be private
sector led. This requires greater emphasis being placed on micro, small and medium-sized
enterprises (SMEs). The report examines the importance and potential benefits of small
firm development in developing countries, and stresses the need for a strategy rather than
ad hoc development. This is particularly important since small firms experience greater
efficiency when they operate in clusters or groups. Under such conditions horizontal and
vertical links develop between enterprises. These, together with subcontracting, result in
a network of formal and informal relationships which greatly enhance flexibility and speed
of reaction time. |
| 4.6 |
Any post Lomé agreement needs to target assistance towards
overcoming ‘government failure’, and to provide assistance to support small
enterprise developments. |
