The 2008 World Development Reportidentifies competition as an important variable of the ruralinvestment climate. Competition triggers innovation and theproductivity gains that drive economic growth, and with itthe creation of jobs. Employment is generally the principalpathway that people have out of poverty. Fostering suchcompetitive environments entails inducing the entry oflocal, mainly small-and-medium enterprises as well as thedevelopment of agribusinesses that enable small farmers,entrepreneurs, and investors to participate in expandingmarkets. The barriers to entry confronting prospective smallrural enterprises include all the risks and costs and marketfailures characteristic of many rural economies, in additionto poor access to financial and public services, weakbusiness skills, and extremely limited or non-existentinformation about what demand consists of in the non-localmarkets they hope to sell to. Improving the opportunitiesand incentives for rural firms to invest productively,expand, and bring on new workers should be a policy priorityfor governments, particularly given the prominence ofpolicy, regulations, and enforcement in ruralinvestors' perception of risk. Providing a sound,enabling policy environment is a vital role of thegovernment and public sector and includes setting foodquality and safety grades and standards and reliablecontract enforcement. Such stable policy environments govery far in relieving investors' uncertainty over whatgovernments will do next, what policies will be formulated,and how policies and regulations will be interpreted andenforced. This is a pressing concern among investors. Makingpolicy formulation and enforcement more predictable candramatically encourage investment (World Bank 2005).
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