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close this bookDeveloping the non-farm Sector in Bangladesh: Lessons from other Asian Countries (WB, 1996, 116 p.)
View the document(introduction...)
View the documentForeword
View the documentAbstract
View the documentAcknowledgements
View the documentSummary
View the documentImperatives and models
View the documentMacroeconomic trends in Bangladesh
close this folderWhat drives growth?
View the document(introduction...)
View the documentGross domestic savings (GDS) (as a percentage of GDP).
View the documentGross domestic investment
View the documentForeign direct investment
View the documentPublic finances
View the documentHuman capital
View the documentHealth
View the documentMessage from indicators
close this folderPattern of development
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View the documentHow does Bangladesh compare?
View the documentDevising a strategy for agricultural intensification
View the documentChoosing appropriate technologies
close this folderOther lessons from comparative experience
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View the documentLesson 1: Take advantage of location
View the documentLesson 2: Promote exports
View the documentLesson 3: Develop infrastructure
View the documentLesson 4: Encourage local government entrepreneurship
View the documentLesson 5: Preparing for industrialization
close this folderRural industry in Bangladesh
View the document(introduction...)
View the documentRural infrastructure
View the documentMechanical and biochemical technology
View the documentNeighborhood effects
close this folderRural industry and export-led growth
View the document(introduction...)
View the documentPossibilities for foreign investment
View the documentDomestic hardles
View the documentFinancing of new enterprises
View the documentNiche exporting
View the documentGrowth poles
View the documentConcluding observations
View the documentTables and chards
View the documentBibliography

Lesson 4: Encourage local government entrepreneurship

The provision and maintenance of infrastructure, and the supply of regulatory and legal services depend on the capacity of local governments. Experience from East Asia, Western Europe, and the United States indicates that the local government entrepreneurship can spur or reinforce private entrepreneurship. In industrial countries local government initiatives include providing fiscal and, possibly, financial incentives in addition to providing essential services. But in East Asia, particularly China, experience suggests local governments have directly initiated new industrial activities in the early stages of development, supplying seed capital and managerial expertise (Oi 1990; Walder 1994, 1995; Nee 1989, 1990). Local governments have shouldered the initial risks associated with entering new fields and helping the community acquire the learning needed to successfully diversify into nonfarm activities. Local authorities in China have taken a leading role in setting up rural industry. Having established these beachheads they have opened the way for private and cooperatively owned enterprises which can take advantage 23 of the pioneering efforts of the government-initiated collectives.

Competitiveness, entrepreneurship, a sound financial strategy, and accountability are the keys to the success of local governments in this endeavor. Competition induces local governments to strive for efficiency, plan for the future, and harness local talent. Entrepreneurship, in sponsoring new start-ups, attracting investment from outside the locality, and persuading provincial or central governments to enlarge their financial stake in the community is crucial for enlarging the resource base.

An effective financing strategy aims at balancing the requirements for infrastructure and services against the revenue from fees, taxes, rates and central government grants handled by local authorities. It calls for economizing on administrative costs and nondevelopmental expenses and for choosing the best possible fiscal arrangement with the nexthigher level of government. Accountability is a function of built-in legal and administrative safeguards, the participatory vigilance of the local community, and the degree to which national politics creates a milieu in which local governments can be fairly elected, have the autonomy to pursue certain developmental objectives, and, as a consequence of competition or demonstration effects, have the incentive to take responsible initiatives.