Evaluating Policy Initiatives for Economic Growth

In a developing economy, the government is considering implementing a series of economic reforms aimed at stimulating growth. The proposed policies include increasing public investments in infrastructure projects, enhancing the regulatory framework to attract foreign direct investment (FDI), and implementing tax incentives for small and medium enterprises (SMEs).

Economists are divided on the effectiveness of these measures in fostering long-term economic growth. Some argue that while public investments can create immediate jobs, they might lead to inefficiencies if not coupled with necessary structural reforms. Others contend that an improved regulatory environment for FDI and support for SMEs are critical for sustainable development.

Based on this context, which of the following policy initiatives is most likely to lead to sustainable long-term economic growth in the economy described?