The Private Sector as an Engine of Growth and Service Delivery
Today, many small states have resumed economic growth since the recent global crisis. Their economic growth is however weaker compared to that of larger peers, reflecting not only the more limited policy tools and resources but also the challenge of diversifying economic structures and re-orienting economic activities in new markets and sectors.
Because of their size, economic recovery in small states has been more dependent on the health of traditional markets and influenced by the strength of external demand in specific sectors. Their remoteness and isolation make it difficult and costly to fully exploit new opportunities — a situation that increases the cost of intermediated inputs and imports and prevents efficiency and innovation. When one dominant activity declines, it has an impact throughout the economy, exposing the population to income volatility which can create additional hardships, as the poorest are less able to weather shocks to their incomes. Government revenues are also affected as they depend on few sources of income.
Despite these common challenges, a number of global trends offer new opportunities for small states—the emergence of global value chains, advancements in hard and soft connectivity, the emergence of new production technologies, and the potential of tapping financial, social, and human capacities of successful diasporas.
To exploit these opportunities, a number of countries are embarking on competitiveness strategies that complement country-wide reforms with industry specific efforts, for example, in fisheries, tourism, agribusiness, extractives and other sectors. The focus on competitiveness is new territory for many small states. Success will require a heavy emphasis on learning-by-doing and tailoring policies to the characteristics and capacities of small states.
The goal of this year’s discussion is to share experiences and distill lessons on industry specific markets and linkages between industrial clusters (for example, infrastructure, policy and institutional support for linkages between tourism and agribusiness value chains) to exploit agglomeration economies and economies of scale and scope, enhance firm-level productivity and sectorial trade competitiveness. Discussion will also touch upon policy options available to small states, ranging from Special Economic Zones, to growth poles and cluster development, as well as regionalization efforts as a basis for identifying an array of market segments that offer opportunities for value addition.
The private sector not only plays a critical role for economic growth and jobs creation but also it is a key partner for small states to increase access to services such as water, waste, energy, transport, telecommunications, education and health. In this context, this year’s discussion will focus on the role that Public-Private Partnerships (PPPs) can play in increasing efficiency and sustainability of public services, and their role in expanding access to and choice of services, particularly for households that tend to be poorly served by traditional delivery methods. Discussion will also touch upon the design, the regulatory framework, and government capacity necessary to realize these benefits in a small states context.