|Private Sector Development in Low-Income Countries - Development in Practice (WB, 1996, 188 p.)|
|Chapter 2-Establishing an attractive business environment agile firms, agile institutions|
Commercial activity on the part of the ruler is harmful to his subjects and ruinous to the tax revenue...[it] crowds out competitors [and] dictates prices for materials and products which could lead to the financial ruin of many businesses. When the ruler's attacks on property are extensive and general, affecting all means of making a livelihood, the slackening of business activity too becomes general.
Ibn Khaldun, 14th century
HIS old truth is even more valid today. In a world where technological change is reducing transport costs, increasing global integration, and changing the nature of competition, firms can no longer compete on the basis of price alone. Design, quality, and timeliness of delivery are what gives today's firms a competitive edge. And for countries to compete successfully requires agile firms connected to world markets.
But firms in most low-income countries have been held back by a difficult business environment that has increased risks and transaction costs. While specific impediments vary, the consistent message is that competition is muted and firms are denied the means to respond to the changing competitive environment. They are denied by economic and political uncertainty, insecurity of economic rights, impediments to trade and investment, complex and discretionary regulations, and high costs of infrastructure and finance.