Catalog

	Table of Contents
p. 10 of 32 BACK | NEXT I. Introduction II. Assessment of Past Performance III. Rationale and Role A. The Private Sector and Poverty Reduction B. Rationale for and Role of Private Sector Operations IV. Operational Strategy V. Operational Improvements VI. Resource Requirements VII. Conclusions and Recommendations

Private Sector Operations: Strategic Directions and Review : III. Rationale and Role

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A. The Private Sector and Poverty Reduction

40. As articulated in the PSD Strategy, development of the private sector is crucial to sustained, rapid economic growth, a necessary condition for achieving ADB’s overarching objective of poverty reduction. The Asian development experience has shown that growth, complemented with direct intervention, is one of the most powerful weapons in the fight against poverty. Growth creates jobs that use labor, the main asset of the poor, and represents the primary path out of poverty for those at the bottom of the economic ladder. As growth proceeds, private sector employment becomes the major source of economic support for the majority of workers and their families. Growth also increases the tax base enabling governments, acting on good governance principles, to finance labor market programs and provide basic social services such as health and education that are also a necessary part of any direct poverty reduction programs.³¹

41. Private sector funding for public utilities and infrastructure also relieves pressure on public budgets, enabling governments to direct more resources to social spending. Governments with limited spending or borrowing capacity are able to utilize such capacity for expenditures that the private sector cannot make. Moreover, since well-designed private sector projects within sound regulatory environments typically operate more efficiently than public sector projects, private sector concessions for utilities and infrastructure services, awarded on a transparent or competitive basis and properly regulated thereafter, often result in lower prices, improved services, and expanded access for the poor, and may speed up economic growth.³² PSG’s second core thrust, the broadening and deepening of capital markets, has been associated with reduced vulnerability and financial sector distress given the bank-dominated systems of Asia, and is therefore a powerful tool for avoidance of crisis and the economic hardship it brings, especially for vulnerable population groups.³³

42. ADB’s long-term strategic framework (LTSF)³⁴ also recognizes the central role of the private sector and of markets in the development process. Thus, under the LTSF, promoting the role of the private sector in development has been adopted as one of the key elements in ADB’s strategic agenda.³⁵

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