The Foreign Service Journal, June 2006

United States ranks third overall in the ease of doing busi- ness, after New Zealand and Singapore. Swedish require- ments are often simpler or involve fewer delays but, like most of Europe, Sweden makes dismissing workers more costly than in the United States (but less costly than in most poor countries). For most developing countries, these microeconomic regulations constitute a major impediment to business productivity and efficiency. Why do poor countries have so much more regulation? In some cases, it is the legacy of beliefs learned decades ago at Western universities, when suspicion of the private sector and belief in the benevolence of government were the conventional wisdom. In others, the benefits that accrue to government officials for their help in getting around such regulations are surely a factor. Regulatory complexity is a major feature in the pervasive corruption, favoritism and crony capitalism of many developing coun- tries. One Latin American wag has characterized the sit- uation for government officials in the region: “For my enemies, the law. For my friends, I can do better.” Reforms of such microeconomic policies need to be identified and addressed on the ground, through the var- ious tools of political economy — doing studies that iden- tify the costs of excessive regulation, making common cause with reformers, building coalitions of adversely- affected groups (often nontraditional exporters), respond- ing to opportunities presented when a particularly dynam- ic minister takes over an important ministry, or a variety of other approaches that creative donor-agency officials might use to help open up a country to creative entrepre- neurship. In sum, addressing such problems requires in- country staff, connected to the local economy and polity. Funding Drivers of Economic Growth The level of funding provided by congressional appro- priations for promotion of economic growth is modest. Only about 4 percent of the USAID budget is available for unencumbered use to promote the largely microeconom- ic reforms that can speed economic growth in poor coun- tries. Another 20 percent or so of the USAID budget is F O C U S 38 F O R E I G N S E R V I C E J O U R N A L / J U N E 2 0 0 6 * per night, single or double occupancy subject to availability Y our search is over, choose a hotel where the federal per diem rate is available year-round. * Luxurious Suites All rooms with full size kitchen & stove tops Fitness center Complimentary in-room coffee Full service restaurant Parking available Across fromMain State White House, The Mall, and Metro Foggy Bottom station (blue & orange lines) within walking distance Accommodations State Plaza Hotel 2117 E. St. NW Washington, DC 20037 Telephone: (800) 424-2859 (202) 861-8200 Parking Available Rated 1 / 2 by AAA www.stateplaza.com E-mail: reservations@stateplaza.com