David King Economics

Since a country’s GDP is no more, nor less, than the sum of the value added of all of its enterprises – which encompass everything from Ford and Siemens to your corner convenience store, or a woman on the shore of Lake Victoria who fishes for a living – then ultimately, economic growth comes down to the growth of individual enterprises. The fundamental question for a country’s economic growth then, is: what does it take for its firms to be competitive?  What is needed for enough of them succeed in delivering products that satisfy buyers to add up to strong growth in sales, jobs, and household incomes for a country as a whole?

What does enterprise competitiveness mean?

What does a firm need to succeed? To exist in the first place, it needs an entrepreneur – a person who has conceived a product whose features and quality are likely to be attractive to consumers, who decides to establish a business to produce and sell that product, and has the basic management capabilities to do so.

Entrepreneurship, then, is a foundation resource for economic growth, because without it there would be no firms.  But while not everyone is a natural entrepreneur, entrepreneurship is natural to the human condition, and is common to all nations and cultures.  It is not a particularly scarce resource, but given the product concept, the entrepreneur needs three basic things to actually have a business:

• Access to a market – one with enough buyers to enable adequate sales
• Access to the means of production – the equipment and inputs needed to create the product in adequate quantity and of satisfactory quality, and
• Access to workers – to implement production and deliver the product.

To some extent, all of these needs can be fulfilled internally, by the firm itself, especially one that is just starting out or is operating at a small scale. But for growth to take off, in order to be adequately addressed, these needs require help that is external to the firm, coming from the system within which it operates.

• To access larger markets, the firm needs transport infrastructure and promotional services
• To access the means of production, the firm needs access to finance and operations advisory services
• To access workers, the firm needs a good educational and training system.

How is development assistance organized?

Recognizing these needs, most development assistance projects for economic growth fall into three broad categories:

1. Business enabling environment reform, which focuses on government: the policy, legal, and regulatory system affecting business operations and the public utilities and services that they depend on.
2. Financial sector development, which seeks to widen and deepen the channels of investment and credit, while ensuring the overall stability of the banking and financial system.
3. Firm-level assistance, which addresses firms or groups of firms directly, to help them improve business management, advance product quality, reach larger markets, and connect with sources of finance.

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