61. Four other, recently completed, World Bank projects also show mixed results. A matching grant scheme in Mauritius intended to help fund technology transfer projects in 154 private firms. An econometric study of its impact found that while there was substantial increase in sales and exports in these firms, the increase was not significantly different from that in firms which had not received the same support.<sup>55</sup> An agricultural technology project in Mexico, which sought to improve agricultural productivity through generation and diffusion of new technology, had a poor disbursement record because government shifted attention away from agricultural research and extension.<sup>56</sup> However, a science and technology infrastructure project in Mexico was successful. Among other things, it helped create the Mexican National Center for Metrology which appears to be have been helpful in promoting the competitiveness of the Mexican industry and in attracting foreign investment.<sup>57</sup> Finally, a project aimed at supporting private sector R&D in Turkey found good results, on balance. This $100m loan to Turkey for a Technology Development Project contained a $43.3m component to support the establishment of a Technology Development Foundation. Its aim was to stimulate private investment in industrial technology development by providing seed capital for projects through matching finance for market-driven private sector R&D. By the end of 1998, it had funded 84 projects of which 46 had been completed. 64 percent of the funded projects were SMEs. Of the 46 completed projects, 74 percent were technically and commercially successful, 20 percent were technically successful but commercially unsuccessful, and 6 percent were technically unsuccessful. The commercially unsuccessful projects may also have added to the technical knowledge base of the company, and induced firms to persist in R&D efforts. The successful projects were able to increase exports of the firm between 5 and 45 percent depending upon the year of completion.<sup>58</sup>

# **IV. Conclusions**

62. Programs involving direct support to private firms in developing countries, such as those analyzed above, are in many ways similar to the activities of venture capitalists. Many of the ventures supported through such programs are high-risk with a relatively low probability of success. A smaller number have high returns, both private and social, often with significant spill-over in the economy. Thus, it is not surprising that the record of public support to private firms in developing countries has been mixed with many projects demonstrating poor returns. The challenge is to design programs in a manner such that there is an adequate number of successful ventures, relative to the unsuccessful ones, to justify the resources expended on these programs. The experience summarized in this note suggests that this would require the imposition of certain disciplines on the programs.

63. First, programs should not be carried out in an unsound investment climate. They may supplement on-going efforts at improving the climate but the minimum pre-

> 55 Biggs (1999). 56 World Bank (1997). 57 World Bank (1998).

> 58 Source: Implementation Completion Report for Technology Development Project, Turkey, 1998.

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