New guidelines on industrial policy and business environment reform

The Donor Committee for Enterprise Development (DCED) has just published guidelines for donor and development agencies on how to complement business environment reforms with industrial policy. I was the principal author of this document, which was based on a background paper and on broad consultation with members of the DCED and its Business Environment Working Group.

The guidance has been published as an annex to the 2008 Donor Guidance on Business Environment Reform, which I was also closely involved in.

The guidance recognises that industrial policy (IP) and business environment reform (BER) share a common objective: to contribute to the development of the private sector in developing and transition economies in order to generate economic growth, increase livelihoods, create more and better jobs, and reduce poverty. Both approaches recognise that entrepreneurship and the private sector development are central driving forces for the achievement of these goals. However, while BER aims to reduce business costs and risks, and promote competition, IP addresses market failures and supports the transformation of the economy. Thus, donor and development agencies should work with their partners (i.e., government, business and civil society) to make changes to the systems in which private sector and economic development occurs through the use of a variety of IP and BER approaches.