MEETING THE CHALLENGE OF PRIVATE SECTOR DEVELOPMENT.

Evidence from the Mekong Sub-Region by Federico Bonaglia.

Paris: OECD. Development Centre Studies. 2006. 150 p.*(1)

MIRACLE, CRISIS AND BEYOND.

A Synthesis of Policy Coherence Towards East Asia.

Paris: OECD. The Development Dimension. 2006. 88 p.**(2)

The Center for the Study of Development Problems, under the auspices of which peer-reviewed works were prepared, was established in 1962 as an independent scientific unit of the Organization for Economic Cooperation and Development (OECD). Researchers from developed and developing countries participate in its work. The Center's issues include studying the experience of economic construction in various countries of the South, mechanisms that contribute to (hinder) their modernization, methods of poverty reduction, and opportunities for OECD members to support these efforts. Based on surveys conducted in developing Asian countries, they are discussed at regional seminars funded by individual OECD countries. Most often, the United States and Japan play this role, especially when it comes to the Asia-Pacific region( APR), as well as the United Kingdom.

Peer-reviewed works are brought together by the renewed interest in the problem of industrialization in backward countries, which noticeably declined in the last decades of the last century. A number of publications of international organizations of that time expressed doubts about the prospects of industrialization in its "classic" Western form. For example, experts from the United Nations Industrial Development Organization (UNIDO), whose mandate is focused on promoting industrial growth in the South, were quite clear in the mid-1980s: many developing countries are experiencing stagnant industrialization, and in some cases the process has reversed. The question was raised even more sharply during the discussion of the problems of the African continent: can Africa industrialize? These assessments are the result of disillusionment with industrial growth policies based on large-scale production using capital-intensive machinery in countries with an oversupply of low-skilled labor. Even in a few large countries, primarily India, industrialization was partial, extending mainly to individual breakout industries, bypassing or partially changing the traditional structure of the economy.

However, the experience of the newly industrialized countries of East Asia, based on the import-export model, has led to a new recognition of the importance of industry in the context of growing globalization, as evidenced by recent OECD publications. L. T. Katseli, Director of the Development Center, believes that manufacturers in developing countries are trying to integrate more actively into international production chains, although they still occupy low-tech positions in them. He asks a question that is addressed to varying degrees in both publications: to what extent can the policies of developing country Governments affect the competitiveness of the private sector? Looking ahead, there is no answer.

F. Bonaglia explores the potential for economic growth in four geographically disparate countries: fast-growing Thailand, whose per capita income is three times that of formally socialist Vietnam, and least developed countries Laos and Cambodia, which experienced a tragic period of genocide and economic destruction under the Pol Pot dictatorship. The author's goal is to offer firm-and industry-level methods of government support for the private sector in these four countries to enhance its role in development. The position is correct, but not original. A 2005 UNDP report notes that the private sector plays a critical role in poverty reduction policies, as

* F. Bonaglia. Responding to the challenges of private sector development. Experience of the Mekong sub-region. Paris: OECD. Development Research Center. 2006. 150 p. (1).

** Miracle, crisis, and so on. Synthesis of the policy of interaction with East Asia. Paris: OECD. Measuring development. 2006. 88 p. (2).

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small and medium-sized enterprises act as the main employers, suppliers of mass goods, and a link to markets. However, the solution to the problem of the private sector goes far beyond the Mekong sub-region, especially in such qualitatively important categories as weak legislation, underdeveloped infrastructure, and high transaction costs inherent in most developing countries. According to Bonaglia, three countries in the sub-region, with the exception of Thailand, have not completed the transition to a market economy. As an active proponent of attracting foreign private capital, he sees this as an opportunity for the country to expand access to the global market and know-how.

In both studies, it is noted that in a relatively short period, since the mid-1980s, attitudes towards attracting private foreign capital in developing countries began to change qualitatively due to new approaches to growth strategies, focusing on methods of increasing employment in order to reduce poverty. In addition, the inflow of private foreign capital is directed primarily to export industries, which has a positive effect on the income of countries, if, of course, they are not plundered. Three sectors were named as priorities for cooperation with foreign capital - textile, clothing and electronics. If electronics were not included in this list, one might say that there is a focus on "calico industrialization". The paradox of globalization is that along with the traditional branches of light industry, a purely modern direction of industrial growth is simultaneously proposed.

Although development in the Mekong sub-region is directly linked to the strengthening of the private sector, Bonaglia recognizes that local firms are not able to guarantee timely deliveries, the necessary quality of goods and their standards. Local markets in developing countries are small, poorly connected to global ones, and domestic demand is focused on a limited range of essential goods. National enterprises, especially small ones, are not able to master modern technologies and quickly respond to the changing requirements of foreign consumers. The greatest difficulties are not only the predominance of small, and in some industries microenterprises, but also the large-scale position of the informal sector. "On average, its share in GNP in 2000 was 41%, in transition economies-38%, in OECD countries - 18%. The ILO estimates informal employment in the non-agricultural sector in Sub-Saharan Africa at 78%, Latin America at 57%, and Asia at 45-85%" (1, p.26). The size of the gap in the latter indicator indicates the lack of reliable data. Production and employment are concentrated in small enterprises, and only a small proportion of them belong to the formal sector, this is the category of "unobserved", as it is customary to call such a niche in OECD publications, the economy, an analogue of the shadow economy.

The structure of enterprises in the industrial sector is highly unbalanced. A few large enterprises, usually with the participation of foreign capital, coexist with a mass of labor-intensive small and medium-sized enterprises that produce primitive products. Coupled with low urbanization and weak infrastructure, this creates a narrow consumer demand, which is limited to essential goods produced using traditional tools. If we recall the proposal of the American marketer M. Porter to characterize the success of an enterprise depending on the presence of a "diamond" of certain advantages (proximity to the market, suppliers, availability of technologies, human resources, organizational capabilities), then in developing countries some of these factors are either absent or they do not work sufficiently.

One of the ways to overcome these obstacles is to combine the efforts of the government and the private sector, including through the active participation of private entrepreneurs in the formation of national growth strategies, for example, in the "Poverty Reduction Strategy". The bottom line is that it is the private sector that makes the main contribution to GDP and employment. However, the author notes the underdeveloped associations of the private sector, the lack of institutionalization of its dialogue with the government. Most often, such associations represent only the urban business elite.

With numerous references to publications of the United Nations, the OECD, and the World Bank, F. Bonaglia emphasizes the need to encourage local entrepreneurship, including in this category all private actors-poor and rich, individuals and companies engaged in risk-related business activities that make profits in the course of market exchange. This definition, according to the author, applies equally to small farmers and MNCs, which makes this approach unclear, if only because the positions of MNCs and their financial capabilities are not comparable with those of a local small entrepreneur.

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The second work contrasts with the sub-regional study of F. Bonaglia is primarily known for its ambitious name, although the word "miracle" has long been used to describe economic growth in East Asian countries. However, since the paper also addresses the 1997-1998 Asian financial crisis and uses examples from Southeast Asian countries, the problem statement and goal are significantly expanded. The authors of the paper (unfortunately not named personally) seek to "draw basic development lessons based on the real-world experience of the most advanced developing economies in East Asia for low-income countries in the region, as well as for many developing countries in other regions" (2, p. 19). This task has not been solved, and could not be solved due to the unique ways and specific conditions of industrialization of four East Asian countries-Hong Kong, Singapore, Taiwan, and South Korea. Teruhiza Kanai, President of the Policy Research Institute under the Ministry of Finance of Japan, puts the task much more cautiously in the preface to the peer-reviewed paper: "The East Asian experience as a concrete example (case study) allows us to discuss a wide range of interrelations and interdependencies" (2, p. 4). There is an Eastern style, when much is said, but there is no clarity.

Indeed, the economic development of East Asian countries has made a strong impression on politicians and researchers, and has become the subject of countless discussions. Their success is obvious: high growth rates, an increase in per capita income, a gradual reduction in poverty, and the formation of a strong middle class as a result of export-oriented industrialization. According to the authors of this work, this is "one of the greatest economic miracles of all time" (2, p. 19). Impressive comparative figures are provided to confirm this: the per capita income of 57 African countries in 1950. It was $ 894, compared to $ 1489 in 2001, while the figures for 16 Asian countries, excluding Japan and China, were $ 685 and $ 5038, respectively, over the same period (2, p. 21). The share of East Asia in the global gross product increased from 11% to 27%, on the basis of which the authors concluded: "One of the main characteristics of development in the second half of the XX century was the formation of East Asia as the third pole of growth in the world economy" (2, p. 19).

Significant socio-economic changes in this group of East Asian countries were the result of successful "clustered, sequential industrialization", during which the structure of GDP was radically changed (2, p.23). In this regard, the authors of the work, referring to the authorship of the Japanese researcher K. Akamatsu (1961), return to the now almost forgotten "goose flock" model, although its development dates back to an earlier period.

It is emphasized that the implementation of such a model meant the transition from the production of labor-intensive to the production of capital - and technology-intensive goods that can withstand competition on the world market. Progress along this path was accompanied by an accelerated servicization of the economy, which places a demand for live labor, which partially mitigated the problem of employment. This character of industrialization is largely due to its support in various forms carried out by Japan, which was in dire need of new sales markets and at that time was not yet able to compete on an equal footing with the products of leading companies in Europe and the United States. Apparently, frequent references to Japan's role in the industrialization of East Asian countries are used to support the authors ' thesis that it is necessary to expand their contacts with OECD countries, which is useful in principle, but cannot be a decisive factor. However, endogenous conditions and local features of a particular country have a stronger impact.

Such a specific definition of industrialization in the region as "coherence" for development purposes deserves attention (2, p. 19). Referring to the experience of the EU, the authors define coupling policy as an international factor, implying the responsibility of developed countries to preserve such "common goods" as open and stable world markets, on which the economic prosperity of all countries depends. It is hard to argue with this simple truth, but the situation in the world economy does not contribute to an equal distribution of these benefits, rich countries clearly get a bigger piece of the pie.

As always, the analysis of the industrialization of East Asian countries highlights their successful focus on the export of finished products, in exact accordance with one of the main ideas of UNIDO, that "industrial exports are the key to development". It is not entirely clear why the term "cluster" is used in reference to the industrialization of East Asia. According to the authors, it is realized in the rapid growth of the export share of finished industrial missile defense systems.-

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products, primarily engineering and transport equipment. It is difficult to agree with the characterization of this type of industrial development as cluster development, since these industries are necessary for the expansion of the domestic market and are characterized by a large range of direct and inverse relationships. I would also like to note that industrialization in its initial stages objectively transforms not the entire economy, but only individual sectors; gradually, modernization incentives are transferred from it to others, or modern enterprises are created in the course of industrialization in most developing countries.

Experts rightly see the special role of the above-mentioned model in the fact that their southern neighbors - the ASEAN countries with average per capita income and such giants as China and India-have followed a similar path after the first four countries called "new industrial countries". This point of view has been widely recognized in works devoted to development issues. At the same time, the experts do not change their common sense, their conclusion is reasonable and relevant: "There can be no single recipe (one-size-fits all) for all developing countries, as this threatens serious risks" (2, p.63). For example, it is doubtful that such industrialization is possible for the ASEAN countries with low per capita income, which is just a group of the Mekong sub-region, with the exception of Thailand. And such estimates are justified not in the sense that the industrialization of these countries is impossible, but in the fact that it will require other terms and mechanisms.

It is also necessary to take into account the gigantic scale of poverty in a number of countries in the Asia-Pacific region. Its main areas are rural areas, where up to 80-90% of the poor population is concentrated (the London Economist accurately expressed this situation in the words: "Agriculture is a parking lot for the poor"). The agricultural sector provides 40% of the employment of the entire labor force in Southeast Asia, with the exception of Brunei, Malaysia and Singapore, and 80% in Laos. The problem of poverty worsened in the late 1990s as a result of the financial crisis in the region. The proportion of people living near-poor was 58% in Indonesia, 43% in the Philippines, and 27% in Thailand. This intensified the search for ways of economic growth as the main method of reducing poverty, which is enshrined in the UN Millennium Program (2000), one of the main goals of which was to halve the scale of poverty. However, as is always the case with the implementation of ambitious programmes, its implementation has encountered significant difficulties, especially in the least developed countries.

The paper presents an interesting interpretation of the impact of the financial crisis on the government policies of the affected countries. The measures taken by States are aimed at preventing or at least reducing the risks and severity of crisis phenomena. Willingly or unwittingly, the authors followed Schumpeter's famous thesis about crisis as " creative destruction." According to them, the financial crisis played "the role of a catalyst in promoting reforms in all countries that survived it" (2, p. 48). This was reflected in the liberalization and deregulation of foreign private investment, more careful monitoring of banking operations.

The authors are right to point out the connection between the success of the pioneering NIS and the positive trends in the world economy in the 1970s and early 1980s, with the favorable exchange rate of currencies, and technological innovations that contributed to shifts in the global industrial structure. This is in marked contrast to the current situation - the intensification of competition in the global economy, the increase in China's aggressive export of cheap labor-intensive goods, which significantly worsened the prospects of economically backward countries of the Asia-Pacific region, which are experiencing pressure on their domestic markets.

From the peer-reviewed works, it is clear that the difficulties of growth have prompted many researchers and practitioners to pay attention to the peculiarities of the institutional environment in the developing countries of the Asia-Pacific region. This interest was also stimulated, not least by the Asian financial crisis of 1997-1998, which showed the vulnerability of the national banking system in a number of countries in the region, built on the principles of so-called crony capitalism, the use of "hot money" and the chronic non-repayment of loans issued to "their" borrowers. It is significant that in early 2007, the IMF warned Vietnam's commercial banks about the danger of providing loans to local entrepreneurs who use them to play on the stock exchange and do not return them within the agreed time frame.

Institutionalism proceeds from the priority of official legislative norms, institutions that determine the framework conditions for the functioning of society, including business, and citizens. " The phenomenon of East Asia suggests that governments play an important role in many areas that are important for sustainable growth..." (2, p.25). The weakness of state institutions, along with the presence of large segments of the population, for which the preservation of collectivist communal values is a major problem.

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traditions-custom, not law, remains the main form of survival, dramatically reduces the innovative adaptability of the economy, slows down the formation of modern market mechanisms.

Despite the differences in the speed and scale of industrialization in the Asia-Pacific region and its weakness in a number of countries, there have been significant shifts in the labor market in the region. China, Indonesia, and the Philippines have become suppliers of labor, while Taiwan, Japan, and South Korea have become recipients of labor, although they are trying to limit the influx of migrants as much as possible by legislative measures. Thailand and Malaysia export unskilled labor and attract highly qualified specialists. Migrant earnings have become an integral part of national economies ' incomes, supporting living standards in some East Asian countries, especially in the Philippines, where remittances accounted for over 9% of GDP in 2002.In 2006, remittances from 10 million Filipinos living abroad reached $ 12.8 billion. This is only a visible part of the influx, as significant funds flow through unofficial channels (havala). The reviewed work highlights the new content of the migration process itself: this is more of a "brain exchange", "brain circulation", rather than the old "brain drain". In this regard, it is natural to refer not only to the importance of migrant transfers, but also to the role of the entrepreneurial diaspora, for example, from China and India, in organizing IT enterprises and services in the country of origin. It seems that the importance of these features of modern migration will increase in the modernization of the countries of the region, but this process itself largely depends on the policies of developed Western countries regarding the influx of workers from outside.

The growth in the number of skilled workers has contributed to the fact that local enterprises in such industries as the production of fabrics and clothing are gradually beginning to be drawn into the international division of labor through the channels of MNCs. This is due to the changing role of the latter in the global economy. (A typical speech by an IBM executive at the giant's annual investor meeting in June 2006, when his strategy was defined as building a " global integrated enterprise.")

In the global price chain, MNCs become "manufacturers without factories", transferring production to less developed countries on the basis of subcontracting and outsourcing. "The globalization of production developed on the basis of the so-called triangle, starting with Asia" (1, p. 59). This is a typical practice of moving production facilities based on comparative advantages, in this case cheap labor and proximity to raw materials sources in the Asia-Pacific region. Large Western trading firms achieve the efficiency of the entire chain, using frequent changes in models, product design, and small batches, and setting strict requirements for suppliers in terms of not only quality, but also deadlines for order fulfillment (for example, within a week). Such requirements, given the low level of mechanization of enterprises and insufficient skills of employees, increase the risk of uncertainty for local producers.

When discussing the prospects for economic growth in East Asian countries at the national and regional levels, experts again return to the problem of institutions: "Good governance can be considered as a package of" good institutions", which includes democracy, honest effective bureaucracy and legislation, and real protection of private property rights. .. and a well-functioning financial system" (2, p. 57). No one disputes these good wishes. The problem is different - how do I switch to this form of management? Following the political correctness that is mandatory for international organizations, the authors formulate their position in a very streamlined way: "The system of governance prevailing in East Asia is based on kinship ties, compared to the system based on law adopted in the West." Another recommendation brings the reader back to the already repeatedly mentioned reference to the usefulness of interaction with the West: "East Asian countries can borrow the positive experience of other developed countries" (2, p. 58). Experience and recommendations are important, of course, but they are only secondary tools that can be used to accelerate economic growth, including by supporting private entrepreneurship.

Peer-reviewed works once again confirm that at the present stage, the policy of industrialization at the national level closely interacts with the world economy. But the analysis of various forms of such "coupling", to use the term given in the text, is useful. In essence, this is the use of comparative advantages in the context of increasing globalization. Unfortunately, both works are skewed towards the "culture of economism", social aspects are relatively poorly covered, although the experience of East Asia, especially the first-wave NIS, provides an interesting basis for assessing, for example, behavioral stereotypes and their role in the formation of modern economies.

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