Fostering Growth in the Middle East and North Africa
Chapter 1: Private Sector Development: Context and Framework
Before beginning the more detailed discussion of private sector and enterprise development in the MENA-12 countries, Chapter 1 lays out the landscape of private sector development (PSD), covering its many facets, the different views held by donors and international organizations about what it is, the policy areas implicated in creating a favourable environment for the emergence of a robust private sector and why this is important for growth. It presents a framework of the major components of PSD and makes the case for an integrated approach to PSD to address the growth and equity challenges in developing countries. In 1995 the Development Assistance Committee (DAC) of the Organisation for Economic Co-operation and Development (OECD) defined the private sector as ‘a basic organizing principle of economic activity where private ownership is an important factor, where markets and competition drive production and where private initiative and risk-taking set activities in motion’ (OECD 1995, p. 7). The concept of private sector development is closely identified with a package of macro and liberalization reforms prompted and adopted by international financial institutions and donors in the 1980s within the framework of the ‘Washington Consensus’1 to strengthen the role and performance of the private sector in achieving sustainable growth. Consensus began to emerge in the mid-1990s that economic growth was essential to poverty reduction and that this could be best achieved through market forces, competition and private initiative (OECD 1994, 1995; Schulpen and Gibbon 2002). In fact the UK Department for International Development (DfID 2007) argues...
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