How can governments achieve substantial increases in productive private investment? ‘Improve the investment climate’ is the dominant advice. However, national-level investment climate approaches have been criticized for not giving adequate attention to context and feasibility. This paper experiments with an approach which addresses these concerns by focusing on sectors and on the relationships between policy makers and investors. After setting out a framework for using this approach, the paper then examines whether it can explain the considerable inter-sectoral and inter-temporal differences in investment in Egypt. The paper shows that where public-private relationships are based on common interest, obstacles to investment and growth are more likely to be removed. The risk of abuse of such public-private interaction is acknowledged but in the examined sectors they have been effective transitional arrangements for enhancing investment and growth and for inducing a new dynamic.
Working Paper 546, Economic Research Forum, Cairo. 29 pp.