Strategies for Stimulating Poverty-alleviating Growth in the Rural ...

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registration, and other direct regulations all combine to influence the business climate and
incentives for investment in nonfarm activities.
An important component of the required enabling environment is the adequate
provision of public goods and services. Uniformly, studies of the rural nonfarm economy
conclude that many of the fundamental prerequisites for enterprise growth remain public
goods. Roads, electricity, telecommunications, and other infrastructure provide fundamental
underpinnings for rural nonfarm activity (Ahmed and Donovan 1992; Ahmed and Hossain
1990; Binswanger et al. 1989; World Bank 1994). Investments in rural education, health and
skills development likewise provide essential building blocks for prosperous, highproductivity
rural jobs. Growth in the rural nonfarm economy will require a set of public
goods, which the private sector, left to itself, will either not provide or will provide at too low
a level from a national economic perspective. 9
The introduction and enforcement of grades and standards, the creation of brands, and
public certification systems constitute important soft infrastructure and soft assets. All
require collective action, at least, if not public intervention. Given the rapid growth of large
retailing and agribusiness firms now operating in rural areas, access by small firms depends
increasingly on their ability to meet quantity and quality standards required by the large
firms. Governments are uniquely placed to play adjudicate and enforce these contractual
grades and standards.
Much of the basic architecture of the required enabling environment is not specific to
the RNFE, but also benefits other sectors including the urban nonfarm economy and
9 Even though private firms could conceivably operate toll roads, private electric utilities and courrier services,
experience suggests that in most rural areas of the developing world they do not. Or at least the private sector
fails to invest as much, as early or as aggressively in rural areas as would be desirable.