Competitiveness or inclusion?
Balancing short-term results with deep-seated change.
Market Development Facility (MDF) is an Australian Government-funded multi-country initiative that promotes sustainable economic development, through higher incomes for women and men. It connects individuals, businesses, governments and NGOs with each other, and with markets at home and abroad. This enhances investment and coordination and allows partnerships to flourish, strengthening inclusive economic growth.
This paper explores the issue of sector selection in market systems development (MSD) programs. It starts from the premise that, if asked, what would a finance minister of a developing country prioritise? Would it be rapid increases in income for a specific demographic, or would it be improved competitiveness of sectors that are crucial for longer term economic performance – and, therefore, increased employment and living standards for the overall population? Development practitioners would caution the finance minister that research shows that a narrow definition of growth does not necessarily directly translate into benefits for the broader population. Growth without enhanced inclusion and/or redistribution may not reduce poverty.
MSD programs seek to promote inclusive growth by raising competitiveness and increasing poor people’s participation in, and benefit from, the markets in which they participate. Programs aim to work in sectors that are important for poor people – as producers, employees or consumers. Sectors are selected based on: (a) relevance to the livelihoods of large numbers of a targeted population; (b) opportunity for the sector to improve its competitive performance, grow and benefit the target population; and (c) the feasibility of aid intervention to stimulate sustainable change in the sector.
However, sector selection is influenced by two additional factors that tend to restrict a program’s scope. First, the short time frame a program has for implementation means that results (typically defined as additional employment and income generated for the target population) must be realisable within the program’s lifetime. Consequently, there is a tendency to choose sectors where simple changes can lead to rapid results.
