Balancing private sector development and local-central relations

Although academics, civil servants and non-governmental organizations involved in development have continued to promote policies for local economies, many localities fail to catch up with average national development patterns. The body of knowledge on this topic has been split into two parts: private sector development (PSD) and local-central relations (LCR). This article argues that, in order for policies to be effective, PSD and LCR should be analysed simultaneously. Drawing on evidence from empirical work conducted in South-East Asia, the article offers policymakers some ways forward. Important features to be reckoned with are the sequencing of policies, the problem of historically rooted disabling institutions, the benefits of local enabling institutions, ethnic tensions and structural opposition from central Governments.