Pragmatic approach needed for enterprise development

The UNCTAD Secretary-General, in addressing the first session of the UNCTAD Commission on Enterprise, Business Facilitation and Development, has called for a pragmatic and systems approach to enterprise development. This has taken on a central role in development and integration of developing countries into the global economy. He further contended that the State could act as a catalyst and facilitator in providing an enabling environment in the process of enterprise development.

by Chakravarthi Raghavan

GENEVA: Enterprise development, which has a central role in the process of development and integration of developing countries in an increasingly private-sector driven global economy, needs a pragmatic and systems approach, according to UNCTAD Secretary-General Rubens Ricupero.

Addressing the first session of the UNCTAD Commission on Enterprise, Business Facilitation and Development, Ricupero said, a systems approach was needed to address the multiplicity and interaction of factors under-pinning the growth and competitiveness of enterprises at both domestic and international levels.

Ricupero told the meeting: "Competition among enterprises increasingly involves competition among national systems composed among other things, of sound policies,support services and institutional backup, innovation, inter-firm cooperation and government-business relations."

Accordingly, there is a need for a coherent policy environment which links macro and sectoral policies, including the timing and sequencing of liberalization policies, with firm-level efforts to expand supply capacity and to attain and maintain competitiveness.

"Thus, the State may be seen as a catalyst and facilitator in creating effective institutions, an enabling environment and an enterprise culture, conductive to entrepreneurship, innovation and inter-firm cooperation."

Earlier, Ricupero noted that when UNCTAD was established in 1964 to accelerate the economic growth of developing countries, it was at a time when a strong role was envisaged for the State, both in the developed and developing countries.

In developed countries, achieving full employment and economic stability was the main concern of the State.

In developing countries, the State was envisaged as the key agent for the acceleration of supply capacity - not only through indicative planning, but in many cases, also through direct involvement in the economy.

Such perceptions, Ricupero pointed out, were common in the literature and in various parts of the UN system, including the multilateral financial institutions.

But the heavy emphasis on the role of the State in the economy frequently led to a neglect of the role of the private sector and of the market.

Even at that time, in his report to UNCTAD-I, Raul Prebisch, the first Secretary-General of UNCTAD, had referred to the critical role of the private sector in the economic development of developing countries.

But the Conference mandated UNCTAD with a work programme which basically, involved intergovernmental deliberations and negotiations.

After UNCTAD-VII (Cartagena 1992), UNCTAD began to work on enterprise development in the context of Economic Cooperation among Developing Countries (ECDC). Subsequent to that Conference, privatization was added to the work programme. At UNCTAD-IX in Midrand, South Africa, a broader mandate was given, embracing a wide range of elements associated with the process of enterprise development.

Despite the general nature of its mandate, Ricupero said, UNCTAD had taken a pragmatic approach with certain distinctive features.

UNCTAD envisaged firms not as isolated actors but as elements of an overall system consisting of firms, as well as markets and government.

At any point in time, each element plays its own role in undertaking economic activities in conjunction with others. Various elements interact and complement each other.

The respective role of each element may vary from one country to another, depending on their specific economic, structural and socio-political characteristics. Similarly, the relative importance of each element may change over time in any particular country, depending on national and international circumstances.

However, in each case, a few questions did arise.

For example, under what conditions, firms, markets and the government can best contribute to the coordination of economic activities? What are the respective roles of enterprises, markets and government? And how can the interaction among the State, firms and markets be improved?

Enterprise development policies aimed at increasing the competitiveness of firms, particularly those of developing countries, would be sterile if unaccompanied by the removal of the barriers created by inadequate trade-supporting services, the UNCTAD Head said.

In the present context of liberalization and globalization, the elimination of these impediments becomes a question of life or death for many of the weaker players of the international economy.

Whereas in an advanced economy, improved efficiency translates into wider margins and increased profits, for traders in developing countries and for Small and Medium-sized Enterprises (SMEs), in general, efficiency has become vital.

Trade Efficiency Initiative

It is for this reason that over the last two decades, UNCTAD has been playing a leading analytical and operational role in fields such as trade facilitation, customs automation and transport modernization.

The consolidated approach to this, endorsed by UNCTAD-VIII as the Trade Efficiency Programme, in its analytical and policy components, allowed the identification and formulation of over 500 practical measures attached to the 1994 Colombus (Ohio, USA) Declaration on Trade Efficiency. If implemented, these would significantly reduce the cost of international trade transactions and enhance the participation of smaller participants in international trade.

These measures refer to the customs, transport, banking and insurance, business practices/trade facilitation, business information and telecommunications sectors, and have been consolidated with UNCTAD's traditional activities in the sectors of transport, finance and insurance.

UNCTAD's approach to the Trade Efficiency initiative is based on the assumption that contrary to past technological revolutions, the information revolution which is reshaping the way value is created and distributed, is one that widens the accessibility to strategic technologies and that allows dramatic productive improvements even in a capital-and technology-scarce environment.

However, the implementation of existing solutions requires that decision-makers in the public and private sector of developing countries and countries in transition be made aware of the possibilities offered by new technologies and of innovative models for the delivery of trade-supporting services.

Putting in practice these new solutions require that reform processes be launched and supported in develop- ing countries, Ricupero added. (SUNS3905)

Chakravarthi Raghavan is the Chief Editor Of the South-North Development Monitor (SUNS) and TWN's representative in Geneva.


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