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From Policy Dialogue to Implementation: How to Solve Public-Private Coordination Failures?

Steve Utterwulghe's picture
Modern industrial policies (IPs) or productive development policies (PDPs) are about identifying and removing constraints to the growth of productive sectors, such as agriculture, tourism, forestry, etc., which implies providing public goods and fixing market failures related to those sectors. Coordination and structured public-private dialogue are critical tools for developing and implementing such policies.

Problems associated with productive development are formidable. They have been heightened by the combination of increased uncertainty and complexity on the production side and the bigger needs to meet environmental, labor, phytosanitary standards, etc.  The solutions to those problems require significant coordination across numerous actors, but this seldom happens because the public and private sector habitually work in silos. 

The Importance of Public-Private Dialogue

There are indeed serious public-private coordination problems. The communication between public and private sectors can be complicated (capture, mistrust, informational asymmetries, outright corruption, etc.). But in identifying and carrying out productive development policies, governments require information that private stakeholders hold about markets, opportunities, binding constraints, etc. Without such information, it would be impossible to understand the sector or to formulate the right policies to address the market failures. As Rodriguez-Clare (2004) puts it: “Even the best-intentioned government cannot succeed without a collaborative and motivated private sector.”

Likewise, private participants know the systemic issues they face but they often require the public sector to help solve them. The public sector has information and a broader purview that complements the private one.  According to Devlin (2016), “governments can also have advantages in terms of assessing aggregate phenomena and proposing strategic directions and objectives, facilitating coordination of investments, and providing public goods to help firms overcome constraints”. In some cases, the information is unknown to both of them and will only be learned through continuous interaction and attempts at implementing solutions.

Structured public-private dialogue as a “viable process and institutional framework of voluntary collaboration between government and business”, as Rodrik (2004) argues, is the essence of modern IPs, rather than the policy outcome as such.

"Public-Private Dialogue for Modern Industrial Policies: Towards a Solutions-Oriented Framework" is a new publication that examines the role public-private dialogue (PPD) mechanisms play in improving PDPs. It briefly addresses the challenges of structural transformation, explains the rationale for PPD, and illustrates the policy tool that is the Mesas Ejecutivas (MEs), or Executive Working Groups.  

Why Mesas Ejecutivas Effectively Address Coordination Failures
Created in Peru in 2015 by the then Minister of Production (co-author of this blog post and paper), MEs are a policy tool designed to identify the key bottlenecks that are holding back a particular sector or factor. Essentially a public-private working group, Mesas Ejecutivas are a space mainly for action and execution. MEs aim to simplify procedures, adapt and update laws and regulations, open new markets, create or improve needed government agencies, provide adequate infrastructure, ensure sufficient incentives for innovation, and mediate between parties.  Mesas Ejecutivas help policymakers take concrete actions to enhance the productivity of a vertical sector (such as forestry, tourism, agri-export, etc.) or a horizontal factor (such as logistics, capital markets, transit, etc.).

MEs can help with coordination failures in more than one way. By meeting regularly with private counterparts during sessions, the public sector improves its understanding of the bottlenecks affecting productivity of a particular sector. This continuous public-private interaction allows the sharing of information as well as the learning of new information, previously unknown to all participants of the ME. Hence, they improve public-private coordination.

MEs also help with public-public coordination given that they include relevant public stakeholders of a particular sector. Issues of duplicity of requirements by public sector entities, implementation gaps (where, for example, one local decentralized entity does not implement the national guidelines given by a Ministry or national entity) or the need for complementary public sector interventions (like infrastructure), are all made evident in MEs sessions.

MEs may also help with purely private coordination failures. Sometimes the ME can allow private sector participants to identify common problems or to generate incentives to formally or informally organize to solve them together. For example, a forestry ME may allow the private sector around plantations and the sector around concessions in the forest, in principle two separate businesses, to identify more clearly their complementarities.
While we acknowledge that many different PPD policy tools exist, we decided to present the very practical and results-oriented case of the Mesas Ejecutivas in Peru to emphasize the impact that well-structured public-private collaborative instruments can have on productive policies.

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