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Burgess Manuscript
IRAQ ... A New Direction 2006
A Strategy for Peace
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Chapter 12: Dozens of Sectors
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Types of Sectors
Dozens of sectors and sub-sectors
There are dozens of sectors and sub-sectors. This is just a small part
of a comprehensive review of sectors, but needed because sector
thinking has become commonplace in the relief and development
sector, and a lot of organizations are organized along sector lines and
have a single sector focus.
Most governments have ministries that are responsible for sectors:
Ministry of Education, Ministry of Health, Ministry of Transport, etc.
The United Nations has established a range of organizations to focus
on different sectors: FAO for agriculture and fisheries, WHO for
health and UNICEF that has a focus on children's health, UNIDO for
the industrial sector and UNESCO for education, science and culture.
There are hundreds of UN agencies and offices with focus on specific
parts of the global economy and society.
Each sector has its own technologies and best practices. But in the
developing “south” the success of one sector is often constrained by
the limits of some other sector. This argues, therefore, for a relief and
development approach that ensure that there is a multi-sector
involvement. There is little consensus about what is the best approach
to making relief and development more effective and getting more
rapid progress.
Various Types of Sector
There are a series of commonly used ways of looking at sectors. They are useful
ways to simplify the dialog.
Hundreds of Sectors and Sub-Sectors
This is perhaps not a complete list of sectors, but it is enough to give an idea of
how many sectors are involved in making society work in a reasonable manner.
The relief and development sector will succeed when all the sectors are able to
function appropriately in any place in the world.
A more comprehensive view of sectors is being developed for publication in a
companion book that will probably be titled: “A Sector Perspective on Relief and
Development”. The following list is in alphabetical order.
Characteristics of sector
A comprehensive mix of sectors in any community is important. I have been told
over and over again that people will not come to remote rural areas because
something they need is not available. It can be health services, or schooling or
the social situation ... but it emphasizes again the importance of the totality of
sector and function in order to have success.
The previous tables show how many sectors and linkages there are.
Because of complexity in the linkages it is difficult to optimize with
formal “planning”. The process is simply too complex, and the
variables too many. The invisible hand of the market mechanism will
make order out of this apparent chaos and complexity. Every
community in the area knows what it needs to better the community.
This knowledge will drive the process if it is allowed to. The program
has embraced the concept of “participation” because participation
allows families and communities to decide themselves how resources
can best be used.
A sector is not tied to any location, though what is best in a sector can
change from place to place. My experience has been that single sector
intervention in almost any community is likely to fail, simply because
critical constraints are being addressed. One sector can improve, but
all the other constraints remain in place. Nothing is optimum until all
the constraints have been addressed.
Sector expertise
Sector expertise is very important, and the products and services associated with
all the sectors should be accessible everywhere they are needed. In the poor
“south” only a limited amount of sector expertise is available, and a lot of things
that ought to be easy to fix never get done.
The relief and development community has responded to this in some measure.
Instead of agriculture projects, the World Bank morphed into rural development
projects, which was a reasonable response to the problem within the construct
embraced by the World Bank.
From a community perspective there needs to be the sector expertise
that is needed to improve the community. There are many sectors that
might be needed ... very much depending on the nature of the
community and what the community wants to make as a priority.
Table – Sector Types
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Sector Type
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Note
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Employment sector
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The part of the economy that generates jobs ... part public ... part private. Important for quality of life and basis for consumer demand.
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Enterprise sector
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A shorthand for the part of the economy where people are entrepreneurial and benefit from the fruits of their efforts.
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Formal and informal sectors
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The formal sector is the part of the economy where there are identifiable entities, jobs and taxes. Everything else is the informal sector.
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Governance - government
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The part of the economy that is engaged in making laws, rules and regulations and seeing to it that they are followed.
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Infrastructure sectors
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The infrastructure sectors include all the hard assets used in the economy like roads, housing, telecom, etc.
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Knowledge sector
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The part of the economy where knowledge is the underlying driver of the value and the activities.
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Luxury sector
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The economic activities that provide goods and services to the wealthy in society characterized by high prices, margins and profits.
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Production sectors
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The part of the economy where the essentials of the economy are produced, from raw materials in mining and agriculture to manufactured items.
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Public and private sectors
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The public sector is owned or operated by government. Private sector ownership is in private hands rather than government.
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Relief and development sector
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All the organizations working in international and local relief and development ... it is part public and part private.
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Service sectors
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All of the sectors that provide services rather than products. These activities have grown rapidly in recent decades.
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Social sectors
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Activities where the main driver is benefit to society. Education and health are two of the main components.
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Inter-Sector Linkage
Linkages between sectors
Development succeeds when all the key linkages are in place. It is possible to
understand the failure of development through an understanding of inter-sector
linkages. This program has been designed to take advantage of the potential of
the economy with the appropriate linkages in place. There are therefore
initiatives in a variety of sectors, short term, medium term and long term, and
through a variety of implementing mechanisms.
When I was first engaged to work in relief and development planning I worked
with “projects” and I worked with “sectors”. With relief and development
results so bad, it is clear that not just one but many things needs to be fixed, that
a single sector approach to project design is insufficient. Even if a single sector
project is well designed, a project needs performance in many other sectors in
order to be successful.
Multi-Sector Linkage
My own experience operating in the “south” showed me very tangibly how much
inter-sectoral dependence there is.
In the “north”, when something goes wrong, the solution is easy. Use the telephone
to call up a supplier, pay money and almost instantly get the goods or services.
Someone operating fishing trawlers in the USA could get all the maintenance
needed simply by telephoning. Spare parts are easy to get, and do not have to be
sourced from half way round the world.
I did not realize how much this is taken for granted until I became involved with
running fishing trawlers based around the world in the “south” ... in Africa, the
Middle East and Latin America ... and frequently a long way from the big cities. We
needed to be able to do everything for ourselves. We had water wells for water,
electric generators for electricity, maintenance technicians and spare parts for
everything electronic or mechanical, and took care of absolutely everything
ourselves. When a trawler needed maintenance, we did it all ourselves.
But while our main operations were the fisheries sector, keeping ourselves operating
required support from every other sector.
The following table sets out the main sector initiatives that are
included in the program for implementation through the government
and the private sector.
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Table: Inter-Sector Linkages
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Public and Private Sectors
Private sector
The private sector has proven to be a powerful engine for wealth creation, for
innovation and for economic efficiency. On its own, however, the private sector
can succumb to a culture of greed, arrogance and entitlement.
The private sector and its associated enterprise and “can do” attitude is a critical
element in making relief and development a success. Private enterprise can
organize and run production sectors so that there is the maximum of value
adding ... the public in the broadest sense must see to it that the value adding is
used in a fair, equitable and just manner.
The private sector is everything else ... and especially the corporate for profit
sector, private philanthropic organizations, and not for profit organizations.
Some health and education establishments are in the private sector.
Public sector
The public sector is owned and operated by the government. In many countries
a lot of social services are operated by the government, including education and
health services. In countries embracing socialism, the government also
nationalized major production industries and operated them in the public sector.
Enterprise Sector ... Employment
Enterprise sector
The “for profit” organizations are sometimes referred to as the enterprise sector.
These organizations have been vitally important in the “north”, and especially
in the United States, in building wealth. The incentives in the enterprise sector
are all favoring the use of least resources for maximum revenue ... the least cost
most value idea that is essential to economic value creation.
The enterprise sector in the “south” is also very important and accounts for
almost all value adding activity. Because the “south” economies are weak, and
failing, if not failed, the enterprise sector is struggling. Where most of the
financial resources are controlled by government and indirectly by donors and
the international financial community, the enterprise sector is sidelined.
Getting the enterprise sector to grow and be profitable has multiple
benefits including the multiplier impact of more jobs and the impact
of tangible value adding in the community. A healthy enterprise
sector attracts other investment, and encourages other entrepreneurs
to become involved.
Employment
Employment ... jobs is a critical component of socio-economic success. More jobs
usually means a more successful economic situation.
Jobs can be in both the formal and the informal sector. A larger number of wage
paying jobs are in the formal sector. Formal employment is possible in both the
private and public sector, in the productive sectors and in the social sectors.
A job is the most value to the economy when the cost to the employer is lower
than the value accruing to the organization, and more valuable again when the
work is of value to society as a whole.
Formal and Informal Sectors
Formal Sectors
The formal sector is probably most easily described as everything that is
incorporated or registered, as well as what is in the public sector, the
government organizations, agencies and structures.
The formal sector is, generally speaking, fully monetized and is included in most
of the economic statistics that are compiled. The formal sector has payrolls, pays
taxes, and buys products and services in a regular manner recognized by law.
Many people only think in terms of the formal sector.
Informal Sector
But there is an informal sector as well. In poor parts of the “south” the informal
sector is the only sector that operates ... it is everyone doing just a little to make
the local economy function as best it can. Often the best is not very good. In the
informal sector nothing is incorporated and nothing is registered. There may be
some exchange of cash, but there is also simple barter and the exchange of goods
and services in kind.
In the poor “south” the informal sector can be bigger than the formal sector, not
only in terms of the number of people engaged in it, but in terms of the
economic product associated with it. Even so, the informal sector does not
usually appear in the economic statistics that are compiled, and to the extent that
it does, the methodology for assessing its scale and its value may not be
particularly well conceived.
Productive and Social Sectors
Productive sectors
There are many sectors that make up the productive sector: agriculture,
fisheries, manufacturing, mining, energy exploitation, forestry, tourism,
transport, etc.
All of the activities in the productive sector transform input resources into
something of more value ... when this is done in a for-profit organization the
outputs are goods and services that are sold and a profit for the organization.
These are value creating operations ... and to the extent that there is tangible
value creation in the productive sector, there is value that can be used for social
value creation on the social sector.
Social sectors
The social sector comprises activities like education, health, support services for
the vulnerable, and so forth. Social services have been a major focus for the relief
and development sector, as well as for left leaning governments that have a
commitment to social justice.
Expenditures in the social sectors are very valuable because they contribute
significantly to quality of life, and they also serve as an investment in the future.
But success in the social sectors does not translate directly into economic
progress ... it merely removes a major constraint to economic progress. Without
opportunity in the productive sector success in the social sector is for nought.
Relief and Development Sector
Relief and development sector
The relief and development sector is the subject of this book. But success in the
performance of the relief and development sector depends as much as anything
on the relief and development sector doing less, and all the other sectors doing
more. We have argued in this book that the relief and development sector has
performance badly, and cannot reform itself to be successful ... and that
therefore there needs to be improvement in other sectors to improve socioeconomic progress.
But when that happens, there are very valuable roles for many of the institutions
of the relief and development sector.
The World Bank, for example, is an organization that can easily focus on
rebuilding the “Public Finance” sector in the “south”. The World Bank is well
suited to doing this work, and could do it easily within its present mandate. The
World Bank could also be a useful financial partner in helping large scale public
works projects for infrastructure improvement get funded. Broadly speaking, I
would like to see much less policy intervention coming from the World Bank,
but a strong commitment to being engaged with universal public accounting
and accountability.
The UN needs to maintain its critical role in convening meetings and
encouraging dialog, but should deemphasize providing finance and technical
assistance. I would like to see the UN also committed to the idea of universal
public accounting and accountability.
Central Banks around the world should be much more engaged in the relief and
development sector representing the financial interests of their respective
countries. They ought to be much more central stage than they have been in the
past, and should be at the forefront of efforts to ensure that there is universal
public accounting and accountability.
Luxury Sector
A very profitable sector
The luxury sector is a driver of a lot of the apparent wealth creation in the
“north”. The value chains associated with the luxury sector are unusual ... and
while profits are real in an accounting sense, the value associated with the profit
makes little sense.
When a fashionable pair of shoes is priced at over $2,000, or a handbag a similar
amount ... there is a huge profit in being the supplier and being in the supply
chain.
But at the end of the chain a person only gets a pair of shoes or a handbag ... and
a basic pair of shoes or a handbag would be more correctly priced at something
like $50.
The same thing is going on in the automobile industry. Various types of
automobile are being built and then being priced at luxury prices from $50,000
to $250,000 and up. Basic transport can be priced at (say) $20,000 and be
perfectly functional. The “phantom value” in the supply chain is not real value
at all, but merely a process of value destruction subsidized by the very wealthy.
Concentrated wealth and huge personal fortunes is very good for the luxury
sector, whether it is for the sale of jewelery or the sale of luxury yachts ... neither
of which have very much socio-economic value ... but the wealthy still buy
them. The bubble of the luxury sector may go on for a long time. The capital
markets have concentrated a lot of wealth into relatively few hands, and these
people may sustain the luxury market for a long time ... but not for ever.
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