In developing countries, global changes are leading to rapid structural transformation. This is marked by far-reaching innovations in ICT (information and communication technologies), growing corporate concentration and an increasing shift of production to developing countries. Trade liberalisation and the relaxation of investment regulations are intensifying the pressure to adapt.

Developing countries need a strong, competitive private sector to meet these challenges. Small and medium-sized enterprises (SMEs) – frequently over 90 per cent of all enterprises – lay the foundation for sustainable economic development, employment and income.

GIZ assists its partners in their efforts to utilise growth potential. Economic development must, however, be structured so that growth also provides opportunities for the poor. For example, GIZ promotes business linkages between SMEs and large companies in partner countries, and the integration of agricultural producers into value chains. This leads to higher added value and to better results for employment and income.

Economic development also contributes to achieving other development policy goals. The state can use tax revenue from business activities for example to finance social services. Environmentally sound production plays a key role in achieving environmental and climate targets.

• Reference Guide for Local/Regional Economic Development (LRED)
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