Volume 1 Cedric - revised luca Final - RUIG-GIAN

Box 1: How does Somalia’s private sector cope without government?Private business has done surprisingly well in Somalia although government has been extremely weak or absent in major partsof the country since 1991.In spite of very rudimentary finance and infrastructure services, private business has thrived in vital sectors (e.g. retail,construction) where transactions can be kept simple. Results achieved by private entrepreneurs have also been impressivein more complex or capital-intensive sectors (e.g. telecommunications, electricity) though some of the solutions may havebeen far from ideal. Even in some activities traditionally reserved for the public sectors (e.g. legal and education systems,monetary policy), where the absence of government can severely jeopardize development, the private sector has been ableto find creative solutions.Although there have been many failings, the large number of success stories is nevertheless striking and attests to the vitalityand resourcefulness of private business in even the most inhospitable environments.The factors that have helped to foster the natural drive of private entrepreneurs can be summarized as follows:a) “importing governance” by using foreign institutions and networks where these are missing locally ( e.g.airline safety);b) “relying on clan systems and networks of trust” to help with contract enforcement, and international andnational fund transfers (hawala system and rotating credit associations);c) “simplifying transactions” and breaking down operations into parts that are manageable by privateentrepreneurs without government or outside help.Conclusion: “For governments and aid agencies, the capability of some business sectors to cope under the most difficultconditions should give hope and guidance in other reconstruction efforts. It may take less encouragement than is commonlythought for stripped-down systems of finance, electricity, and telecommunications to grow.”This summary is based on an article co-authored by Tatiana Nenova and Tim Harford of the World Bank-International FinanceCorporation. It can be found at http://rru.worldbank.org/PublicPolicyJournal. The article generated a rich discussion on therelative roles of the private sector and government in weak states. This discussion may be accessed through the same site.2.5.2. SMEsThe ILO, the World Bank and other relevant IGOs have well-tried policy tools thatare appropriate for promoting local economic development and SMEs in general. 21 Suitablyadapted, these are appropriate for use in crisis response, in both conflict- and disasteraffectedcountries. They include:• Assistance with public employment services, which are needed as much by enterprisesas by government and job-seekers, and which play a critical role in crisis response.• Employment-intensive infrastructure reconstruction not only makes it possible forlocal firms and workers to capture a larger share of the reconstruction expenditure thanother approaches. It can also be competitive in terms of cost and quality, and thosetypes of projects where it excels (such as rural roads, and irrigation schemes) benefitespecially rural areas, which are too frequently neglected in reconstructionprogrammes. It is important to pay sufficient attention to the identification,development and training of local contractors who know how to use these techniques. 22In Ghana, associations of labour-based contractors have recently been established, andthey have multiplied the impact of ILO training programmes.• The concept of Local Economic Development not only is compatible with but dependscritically on the participation of the private sector. Its tools include businessdevelopment services, employability enhancement, social finance schemes, the21 A. Tolentino, Guidelines for the analysis of policies and programmes for small and medium enterprisedevelopment, ILO, Enterprise and Management Development Working Paper EMD/13/E.22 Peter Bentall, Andreas Beusch and Jan de Veen, Employment-Intensive Infrastructure Programmes: CapacityBuilding for Contracting in the Construction Sector—Guidelines, Geneva: ILO, 1999; and ILO, Employmentintensive reconstruction works in countries emerging from armed conflicts—Guidelines, 1999.20