ADB calls for strong partnership between state, firms

ADB calls for strong partnership between state, firms

Deutche Press Agenteur, Manila

A strong partnership between governments and private firms is
vital in boosting a nation's competitiveness amid a highly
globalized and technological market, the Asian Development Bank
(ADB) said Monday.

The Manila-based ADB noted that competitiveness has become one
of the most important issues in the debate over how countries can
enhance their economic performance amid globalisation,
technological advances and growing competition.

"Development requires a partnership between market and state
with an appropriate division of responsibilities," the ADB said
in its Annual Development Outlook (ADO) 2003 report.

"The objective of this partnership is to create a competitive
or well-functioning market economy, whose ultimate objectives are
to raise living standards and by implication, reduce the gap with
countries at the income and technological frontier," it added.

The report said governments must understand that "it is firms
that compete in an increasingly global market, both at home and
abroad, and that the national policy environment can either
constrain or improve their efforts".

Governments must therefore focus on providing a legal
framework that facilitates the entry and exit of corporations,
implements sound policies and corrects market failures to support
the strategies of firms to stay in business and generate new
markets.

"A government's efforts should be directed at convincing
investors that the country is implementing sound economic
policies," the ADO said.

But some government interventions aimed at correcting market
imperfections are more problematic than helpful, such as export
processing zones or industrial parks which often have minimal
benefit to domestic activities, the report noted.

"These types of direct interventions often mask failures in
achieving the essential functions of government required to
sustain firm-level competitiveness," it said.

Competitiveness is best achieved when firms are encouraged to
continually enhance their entrepreneurial and technological
capabilities through education, innovation and improved physical
infrastructure. -- dpa