International Consultant
Experience > Economic and job promotion

Economic and job promotion

Structural adjustments and market opening have created very few new jobs in developing countries. This can be traced in part to the fact that SMEs are still trying to compete with the standardised and mass-market products put out by large domestic and foreign companies. It is necessary to seek new routes and design new products.

In the beginning, macroeconomic stabilisation policies, market liberalisation, privatisation, and outward economic opening boosted economic growth heavily in many countries. Recent years, however, have seen a sharp decline in that growth.

The population at large has benefited very little from these structural reforms thus far. In fact, unemployment, underemployment, and informality are on the rise. The poor economic performance of recent years (except in some Southeast Asian countries) has hampered the creation of new jobs in the formal sector, while the informal sector has a growing supply of manpower.

The roots of this situation are complex. Globalisation presses most strongly precisely on the traditional sectors that are known for being heavily labour-intensive and using a low level of technology; these are located for the most part in developing countries. Competitiveness is being increasingly defined in terms of capital, technology and skilled labour, with the result that cheap and unskilled labour is losing out.

The situation of SMEs is worsened by the fact that they compete directly with large domestic industry, particularly in the area of products for the mass market (garments, footwear, and simple food products) and are unable to match its scale of production. Low pay, unpaid family labour, and failure to comply with social security and pension payments are seized upon to balance the scale.

We have a major challenge ahead of us. We must find ways to increase competitiveness and at the same time create new jobs. To mention only a few of the measures that point in the right direction, we have: modernisation, quality improvements, better adaptation to the circumstances, and specialisation, more rapid response, demand orientation, integration into enterprise networks, subcontracting, export promotion, etc.

Many people who are unable to find job opportunities in the formal labour market create their own informal micro-enterprises with little or no capital and little or no specialised professional expertise. There are few barriers to this kind of business, with the result that labour and the goods it produces are oversupplied. These products are poor in quality and are purchased for the most part by people with few resources. Organisational and institutional measures in this sector are normally socially oriented (one of the reasons being that a large percentage of women find employment in it). It is important, however, to determine whether there are micro-entrepreneurs with the potential and the capacity to move to the formal sector of the economy.

Pertinent experiences in this area I have acquired in Peru (formulation of competition and export promotion policies); El Salvador (designing an economic and employment promotion policy) and Honduras (job promotion for rural micro-enterprises).

Copyright © 2012 Heiko Windolph, Berlin
Last update: June 2012