Realising the potential for rural regions

The sectors described in the previous section have strong links with each other including competing for labour, land and other inputs, and buying and selling to each other. The first key challenge is therefore to identify the possible complementarities between different policies and to design specific instruments to promote the synergies between them (Box 2.14). For Chile, complementarity gains are possible both at the national scale as well as in different levels of government. The latter will be further explored in Chapter 3.

Adopting aspects of both the “broad and narrow” approaches to rural development provides a way to break the current “silo approach”, where individual ministries focus only on their narrow responsibility and ignore possible spillover effects onto other sectors. Table 2.4 provides a snapshot of the development potential of a number of key sectors in rural Chile. The table shows that most of these sectors have the potential to increase employment, spread geographically over more territory and innovate to improve their competitive position. Even sectors such as agriculture and fishing, where employment is expected to decline, will be able to become more productive and more competitive by substituting capital for labour. Other sectors such as aquaculture, food processing, tourism and manufacturing have the ability to expand in all three dimensions.

Box 2.14. Policy complementarity

Policy measures often generate externalities, which can increase their effectiveness if they are properly used. The concept of policy complementarities refers to the mutually reinforcing impact of different actions on a given policy outcome. Policies can be complementary because they support the achievement of a given target from different angles (as in the case of production development policy, innovation policy and trade policy, all of which support the competitiveness of national industry). Alternatively, a policy in one domain can reinforce the impact of another policy.

The “time dimension” or “sequencing” is also important in policy complementarity. Some policies are best put in place and strategically planned simultaneously. For example, innovation, industrial and trade policies must be synchronised to address the issue of industrial competitiveness from all angles. Other policies realise their synergies in a sequential way. For example, investments creating broadband infrastructure need to be followed up with specific policies targeting access and diffusion of those services to the population.

Complementarities between policies can be “latent”, and can be fostered by specific governance arrangements, for example, if mechanisms to co-ordinate state, municipal and federal action in education are in place. Alternatively, they can be induced, by combining different policies through conditionality schemes, or when the complementarities are the result of strategic planning. Employment generation opportunities, for example, can be attached to direct cash transfers to support the inclusion of poor people in production, so that they can avoid dependency on income transfers.

Policy complementarities can also be spontaneous when they appear as externalities of independent actions of ministries or bodies that design their interventions or are attached to existing initiatives.

Table 2.4. Development opportunities in major economic sectors in rural Chile

Table 2.5 expands upon these areas of opportunity, focusing on the ten dimensions of modem rural development and how they can help Chile advance in realising its rural growth potential in a number of key sectors. The rows of the table correspond to the ten central elements of a modern rural development polices and the columns are the sectors. Each cell identifies a specific type of action that could be undertaken to improve the productivity and level of output in its corresponding sector. As identified in the table, Chile’s rural regions have growth potential in a wide number of domains. These suggestions should be seen as broad frames for creating specific policy that are appropriate for the Chilean context.

Table 2.5. Realising the growth potential in Chilean regions

OECD RURAL POLICY REVIEWS: CHILE О OECD 2014

Table 2.5. Realising the growth potential in Chilean regions (cont.)

But this expansion is not assured. A recent OECD publication (OECD, 2012a) concludes that effective policy and institutional support is required to realise the growth potential of rural regions. While rural Chile has a strong potential for growth, it currently lacks much of these two key areas - policy framework and implementation mechanisms - targeted to rural areas. The next section and Chapter 3 will provide suggestions on advancing in these two critical areas for Chile.