Woodward, Richard Kozarzewski, Piotr Safavi, Mehdi
CASE Network Studies & Analyses No. 434
After a long period in which state-led development was the dominant economic paradigm, since the 1980s private sector development has been the focus for economic policy makers. It is probably no coincidence that economic growth, stagnant for a few decades in much of the developing world, took off in the 1990s after this policy shift, and has generally remained high (in spite of a wave of crises and recessions in the late 1990s and early 2000s). Privatization has made a great deal of progress in the developing world, particularly in Latin America, though the Middle East and North Africa (MENA) have lagged somewhat. One of the main lessons for privatization policy makers in MENA countries from the experience in other regions is that merely transferring assets from the state to the private sector is not enough to ensure improved social welfare; competition and the institutional environment are also very important. With respect to the latter, much attention has focused in recent years on improvements in the business environment, which are necessary to spur entrepreneurship and encouragement movement from the informal economy into the formal sector. In this area the post-communist countries have been leaders; while Latin America and the MENA region have also seen significant improvement, they still lag behind the new European Union member states as well as some of the post-Soviet states (although the MENA region performs very well with respect to the protection of property rights). The area where the MENA region needs improvement most drastically is in the financial sector. Although rich in savings, it performs very poorly in these countries with respect to the provision of credit to the private sector (particularly small and medium-sized enterprises), largely due to the insufficient level of competition in the sector. We conclude with some speculation regarding possible scenarios for development between now and 2030.
Private sector Privatization Business climate Middle East North Africa Latin America Post-communist Central and Eastern Europe