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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

Increased employment

Potential for wider geographic expansion

Innovation potential

Agriculture

-

++

Agricultural processing

++

+

+

Fishing

-

+

Aquaculture

++

+

++

Forestry

+

+

+

Mining

+

++

+

Renewable energy

+

+

Manufacturing

+++

++

++

Tourism

+++

++

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

Modern rural economy attributes

Agriculture and agricultural processing

Tourism

Manufacturing

Fishing

Mining

Aquaculture

Renewable

energy

Forestry

1. Innovation

Strengthen national agricultural research system and improve extension

Identify opportunities to serve product needs of other rural sectors

Support innovations that help sustain fish stocks instead of depleting them

Support energy- and water-saving innovations

Research to identify new species and new uses

Potential for innovation

Explore production of higher value added goods, pulp and

renewable energy potential

2. Human capital

Provide technical training

Introduce training and education programmes for tourism workers

Worker training, especially for intermediate skill occupations

3.

Infrastructure

accessibility

Better roads and telecommunications and improved local markets

Better roads and telecommunications

Provide

infrastructure to improve market access

Ensure

transmission grid is capable of absorbing production

4. Business creation and expansion

Better integrate dual economy through skills and capacity of small farmers

Support for new site development and improvements at existing sites

Support for small-scale manufacturing

Ensure equitable access to grid

5. Competitiveness

Identify commodities with strong export potential

Allow competing operators when possible

Focus on improving productivity

Improve

productivity

Avoid excessive subsidies

6. Economic diversity

Link agriculture to other sectors (farm-based tourism, eco-tourism)

Consider agro-tourism especially where cultural offer is also strong

Minimise adverse

environmental

impacts

Link with other sectors and minimise adverse environmental impacts

Minimise negative impact on landscape

Explore links with renewable energy sector

7. Investment focus

Help with sustainability of tourism

Require strong business plans as a prerequisite for support

Avoid subsidies that encourage over-fishing

OECD RURAL POLICY REVIEWS: CHILE О OECD 2014

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

Modern rural economy attributes

Agriculture and agricultural processing

Tourism

Manufacturing Fishing Mining

Aquaculture

Renewable energy

Forestry

8. Co-ordinate multistakeholders bottom- up and top-down

INDAP’s network can improve vertical co-ordination and local participation

Help with

sustainable goals by engaging multiple stakeholders

Greater co-ordination could reduce conflict with scarce resources (water, energy)

Local acceptance is crucial and should be supported by RE energy

Co-ordinate a number of institutions in forestry that are disconnected

9. Urban rural linkages

Better promote rural tourism in cities. Explore urban-rural tourism packages.

Explore integrated rural and urban tourism

Better links can transmit knowledge and business know-how

10 Sustainable and environmental focus

Expand conservation tillage and water saving irrigation technology

Promote eco-tourism and ensure adventure tourism has low impact

Reduce environmental impact of extraction and processing

Ensure production practices minimize adverse wildlife impacts

Reduce impacts of large scale hydro and major transmission lines

Protect native species and manage timber harvesting to maintain environment

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.

 
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