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a pure public good, externalities, noncompetitive markets as a result of policy distortions, information asymmetries, or coordination problems) prevents the private market from adequately playing its role. Second, these interventions should focus on sectors and subsectors that demonstrate the most potential for comparative advantage and job growth. Third, they should be cost-effective in the short and long runs, with limited fiscal impact. Fourth, implementation capacity and implications for governance and the political economy of reforms should be assessed thoroughly.
Public-Private Partnerships In China (and less so in Vietnam) the public sector has overcome its initial hostility and, despite remaining obstacles associated with property rights, access to finance, rule of law, and so on, has demonstrated growing capacity to support and cooperate with private business, especially at the local level and in sectors like light industry that do not occupy a prominent position in official development plans. In Africa, by contrast, an adversarial relationship often exists between the public and private sectors. Public entities view private firms as a source of rents or as vicious, corrupt profit seekers bent on exploiting the nation’s resources. Private firms see the public sector as a source of rent seeking or trouble making. Bridging this gap will take some time. In the early years of industrial development the Chinese government built a reasonable track record in providing macroeconomic stability and gradually dismantled elements of the former planned economy that had prevented the establishment of openly private enterprises and hampered the expansion of small and medium enterprises in the public sector. Chinese governments provide a wide range of fiscal incentives in the form of tax holidays for newly established companies in industrial zones. They refund value added taxes to exporters. They clear land for development of the zones and engage private developers to provide the facilities and services. They also help industry by cultivating networks and associations. In recent years rising costs for labor, land, energy, and materials, limited land, and increasing environmental requirements have made it harder for local governments to provide these incentives. But the ongoing commitment of Chinese local governments to fueling local economic growth, which is rooted in the benefits that strong growth provides to local officials in the form of improved prospects for promotion as well as personal emoluments, reflects the success of China’s current system in broadly aligning the interests of the center, local administrations, the business sector, and the populace at-large, all of whom have shared in the benefits of sustained growth.