While FDI and other types of foreign collaboration can help improve competitiveness, particularly in manufacturing sector, and while almost all developing countries and transition economies can point to a few such projects, many countries are disappointed in the interest shown so far by the foreign enterprises. Despite liberalization by countries of the framework for foreign investment, foreign investors have not been enticed because of high transaction costs and inherent risks of investment in collaboration with weak and inexperienced local partners. The report identifies the creation of an enabling environment for entrepreneurship and enterprise activity as one of the most important roles of public policy intervention, including government measures and international financial support of such measures. Also essential are institutional, legal and commercial frameworks defining the market conditions for transacting business. An important aspect is the quality of the working relationship between government and the private sector.
All governments regulate the private sector in one way or another.
How this is done often matters more than why. In terms of global supporting activities, the report notes that there is no shortage of policy approaches and technical cooperation programmes for enterprise development. At the macro-level, the World Bank, IFC and other institutions provide advice, usually focusing on policy and institutional reforms and removal of obstacles to conducting business. At the micro-level, the focus is on providing supporting and training to enterprises of all kinds. SAPs, the report says, should include strong measures in favour of such enterprise development.