Promoting Competitiveness in Practice - Economic Growth - usaid

Foreword by the USAID Administrator
This report – Promoting Competitiveness in Practice: An Assessment of
Cluster-Based Approaches – was prepared by The Mitchell Group at the
request of the Office of Economic Growth in USAID’s Bureau for
Economic Growth, Agriculture, and Trade (EGAT). Harvard’s Michael
Porter and others have led the way in suggesting that development of
dynamic and innovative business clusters is critical for countries to
compete more effectively in world markets. Macroeconomic stability,
strong institutions, and the rule of law are widely recognized as essential
to economic growth. Porter’s competitiveness approach emphasizes the need to pay attention
to sector-specific reforms and other aspects of the microeconomic environment in which
businesses thrive as well as the macro context.
USAID and other donors have taken up the challenge of applying this theory, launching a
number of cluster-based competitiveness projects intended to facilitate the formation of
sector-specific industry groups. The projects identify policy constraints, new technologies,
and new ways of working together that, combined, are expected to increase productivity and
allow the industry to compete effectively in global markets. Because cluster-based
approaches are growing in USAID and among development practitioners generally, we felt
that it was important to commission an independent assessment of these applications of
cluster theory and the results they have achieved to date.
To our knowledge, this is the most comprehensive effort yet to evaluate the performance of
cluster-based approaches to promoting competitiveness in developing countries. Many
development professionals remain deeply skeptical of industry- or firm-level level work,
preferring to emphasize efforts that develop the investment climate without running the risk
of “picking winners” or promoting a particular sector. A careful reading of Promoting
Competitiveness in Practice suggests, however, that work at the industry and firm level can
quickly illuminate both macroeconomic and microeconomic constraints to growth and can
engender a “participatory” process of reform that ensures private as well as public sector
ownership. The report also offers concrete recommendations for increasing the effectiveness
of cluster-based programs.
It is my sincere hope that this assessment will complement the impressive new information
becoming available on investment and business climates across the developing world. We
thank the authors and The Mitchell Group Inc. for an unusually thorough and thoughtful
report.
Andrew S. Natsios,
Administrator, USAID