Interest in investment climates hasemerged relatively recently. In the 1960s and 1970s,governments in many countries believed they should play adirect role in rural credit, input supply, production,trade, transport, distribution, and even marketing. However,in the 1980s and 1990s, government-dominated systems fellinto disgrace because of poor performance. For the ruralsector, the primary focus had traditionally been onagriculture, particularly commercial agriculture andagribusiness, which were perceived to be the main drivers ofrural growth. This study's essential findings andpolicy implications are organized into the following sixchapters. Annexes provide supporting material. Chapter twopresents an overview of related work and of the literature;it also describes the subsequent chapters'methodological framework, including new ways of addressingquestions of endogeneity in these kinds of surveys whileseeking to isolate cause and effect. Chapter three, byapplying econometric analysis, measurably extends theexamination of enterprise performance and investment climateconstraints initiated in RIC1 (first rural investmentclimate). A rigorous examination of enterprise dynamics andentrepreneurial choice is developed in chapter four. Aimingto highlight the differing effects on Rural NonfarmEnterprises (RNFEs), chapter five draws together the mainimplications RIC2 findings on the rural investment climatein the three country pilots. Community-level influences alsomatter, and chapter six examines how the local IC and othercommunity characteristics shape the environment for economicactivity. Conclusions and recommendations appear in chapterseven, including suggestions for using RIC results forpolicy reform and for targeting the rural publicexpenditures needed to foster improvements in the ruralinvestment climate. The annexes describe the databasesemployed and the methodologies used in the study, as wellproviding detailed regression results.
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