Private Sector and Development

Question 1

Who/what is the private sector?

Answer 1

• Micro-businesses that are not formally registered (INFORMAL SECTOR) such as street vendors
• Small and medium sized enterprises:
  1) Small entrepreneurs (formal sector) –> plumbers, electricians, print-shops, corner shops
  2) Medium sized businesses (over 20 employees)
• Multinational enterprises
• Foundations/think-tanks that originate in private sector money, advocate for a business approach to development problems
• Problem of informality (informal sector) particularly important to developing countries
• The poor have effective control of assets, but without legal title that enables them to convert assets into (working) capital
• Need to better strengthen and enforce property rights

Question 2

Multinational Corporation (MNC)

Answer 2

Types of MNCs:

1) Multinational Enterprise (MNE)
2) Transnational Corporation (TNC)
3) Foreign Direct Investment (FDI)

• Activities in more than one country (subsidiary country)
• MNCs lead the globalization process (dominate all structure of the global economy: (agriculture, production, finance, technology, security, energy, trade)
• MNCs must…
  1) coordinate value-adding activities across borders
  2) internalize cross-border transfer of inputs
• MNCs are contentious because of “behind the border” effects (jobs, culture, political and economic influence)