Towards more effective provision of business services: conceptual considerations and practical examples from Thai-German development cooperation

Abstract

"The study is based on desk research on the BDS concept as well as on the available empirical evidence. In addition, we conducted a number of interviews with GTZ project managers and Thai counterparts during the spring of 2003. In coming up with our general assessment of Thailand’s institutional performance in business services, we draw on a parallel GDI research project with a much broader empirical base. Chapter 1 summarizes the new BDS paradigm, presenting the four principle arguments that cast doubt on the traditional path taken by state- or donor-led service provision as well as the policy conclusions made by proponents of the BDS market approach. Chapter 2 then identifies four conceptual and practical limitations of this school of thought. Chapters 3-6 go on to elaborate on these four critical arguments. Chapter 3 discusses the distinction between public and private goods, arguing that some business services are, at least in part, public goods, and concluding that there is a case for subsidizing them. In Chapter 4 we show that the evolution of private service markets is a slow process of interaction between customers and service providers. These interactions serve to increase specialization and deepen the division of labour, thus contributing to productivity growth, innovation and competitiveness.\nGovernment action aimed at accelerating this process may thus be assumed to spur economic\ndevelopment. Chapter 5 demonstrates that service provision for SMEs is a political issue. Some politicians and bureaucrats clearly pursue self-interests which may not be compatible with the new paradigm of undistorted private service markets. Development of such markets is therefore not a technocratic project but one that requires political bargaining. In Chapter 6 we point out that the development of service markets never starts from scratch. Usually there are already a number of established subsidized, and often bureaucratic, service providers. This leads us to discuss the challenge of how to propel these service providers towards business-like modes of service delivery. Finally, Chapter 7 draws some practical conclusions for development co-operation." (author's abstract)

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