Publication: Assessing the Investment Climate for Rural Enterprises
Date
2008-05
ISSN
Published
2008-05
Author(s)
Larson, Gunnar
Lamb, John
VanDer Meer, Cornelis
Abstract
The 2008 World Development Report
identifies competition as an important variable of the rural
investment climate. Competition triggers innovation and the
productivity gains that drive economic growth, and with it
the creation of jobs. Employment is generally the principal
pathway that people have out of poverty. Fostering such
competitive environments entails inducing the entry of
local, mainly small-and-medium enterprises as well as the
development of agribusinesses that enable small farmers,
entrepreneurs, and investors to participate in expanding
markets. The barriers to entry confronting prospective small
rural enterprises include all the risks and costs and market
failures characteristic of many rural economies, in addition
to poor access to financial and public services, weak
business skills, and extremely limited or non-existent
information about what demand consists of in the non-local
markets they hope to sell to. Improving the opportunities
and incentives for rural firms to invest productively,
expand, and bring on new workers should be a policy priority
for governments, particularly given the prominence of
policy, regulations, and enforcement in rural
investors' perception of risk. Providing a sound,
enabling policy environment is a vital role of the
government and public sector and includes setting food
quality and safety grades and standards and reliable
contract enforcement. Such stable policy environments go
very far in relieving investors' uncertainty over what
governments will do next, what policies will be formulated,
and how policies and regulations will be interpreted and
enforced. This is a pressing concern among investors. Making
policy formulation and enforcement more predictable can
dramatically encourage investment (World Bank 2005).
Citation
“Larson, Gunnar; Lamb, John; VanDer Meer, Cornelis. 2008. Assessing the Investment Climate for Rural Enterprises. Agricultural and Rural Development Notes; No. 25. © World Bank, Washington, DC. http://openknowledge.worldbank.org/entities/publication/a23a1d9f-e489-550e-b32d-51ca0d3fb24b License: CC BY 3.0 IGO.”