World Economic and Social Survey 1999

Trends and Policies in the World Economy

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Part one. State of the World Economy: provides a chronicle of how large parts of the world economy were sent reeling in the past two years by the fragility of financial systems and their international connectedness. On the whole, the world economy seems to have hit bottom and most of the affected countries are moving towards recovery. Part two. Financial Development in the Globalizing World: serves as a contribution to the international discussion on “financing for development”. It seeks to give a perspective on the major changes that have been taking place in recent decades in the banking and financial systems of developed, developing and transition economies.



Venture Capital in Developing and Transition Economies?

In the knowledge-based global economy, a country that relied on a development model of “importing” known and well-tested technologies from foreign sources, including from foreign firms, would, in effect, be consigning itself to permanently following the leaders. It would not obtain the substantial benefits that come from introducing a new product and later, when it was on the point of replacing this with a higher-technology product, licensing its production to lower-wage producers. Its workforce might “learn by doing”, but it would always be a few steps behind the leaders in the industry: by the time that the imported technology had been learned, it would be out of date. This will be the experience of the developing and transition economies, even the fast-growing ones, unless they, too, develop the capacity to participate in and contribute to the knowledgebased global economy. The question is how and where they develop this capacity. The topics to be discussed in the present chapter are currently pertinent to only some countries and with respect to only certain activities, but a vibrant and expanding venture capital industry can be expected to play a growing role in economic development in the twenty-first century.


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