Promoting Competitiveness in Practice - Economic Growth - usaid

Campeche to coffee in El Salvador, traditional sectors demonstrated their reluctance to embrace
the new ways of doing business embodied in cluster development. These findings reinforce the
importance of the “self-selection” process discussed extensively in Chapter 4. Operationally,
these findings tell us that:
• Cluster selection must rely on cluster members’ interest and enthusiasm. To demonstrate
the benefits of working together, cluster-based competitiveness funds must go where
movement, however small, is happening ... not where the economy “used to be.”
Funneling too much money through a competitiveness initiative may weaken local
initiative.
Although it is not possible to prescribe a uniform budget for cluster-based competitiveness
initiatives (as always, local context matters, as does the number of viable clusters), tens of
millions of dollars are not likely to be necessary for this type of development assistance. Indeed,
the more money available, the less the private sector may be willing to devote its own resources,
thus undermining local ownership and initiative. As a result:
• Cluster-based competitiveness initiatives should include funding for both facilitation –
including a long-term presence by trusted facilitators – and technical assistance on
specific industry or functional topics.
• Funding for activities that primarily benefit one or a handful of companies should be
avoided, and funding that replaces costs normally assumed by the private sector should
not take place.
It may be more challenging to implement cluster-based competitiveness initiatives in
transitional economies.
Transitional economies often are characterized by contextual obstacles that, though present in
other countries where USAID operates, seem more pronounced or entrenched in nations that
have experienced many years of central planning. These features include, for example: a weak
civil society in which there is little or no trust between the public and private sector; a lack of
tradition of taking joint action on a voluntary basis; a production rather than market or customer
mindset; and weak understanding of international markets and basic business skills. From the
experience in Mongolia, in particular, we learn that:
• Initial efforts to generate understanding of broad competitiveness principles (i.e., Step 1)
may need to be hands-on, interactive and tangible, rather than academic and theoretical.
Cluster-based competitiveness initiatives are not a “quick fix.”
Mindset change does not happen overnight. Neither does behavioral change. Trust develops over
time, as does understanding of and ability to put into practice new concepts. As do new
relationships among businesspeople. And so on. In other words, none of the key elements
underlying the human dimension of cluster work occurs quickly, meaning that results from the
overall process can be expected in the short-term. As a result,
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