Transcript Alistair Nolan, Head, OECD Investment Compact for South East

Sources of Regional
Competitiveness
Alistair Nolan
Investment Compact for South East Europe
Private Sector Development Division
OECD
Regional competitiveness
• “Competitiveness“- concept
• Macro – micro components
• OECD Investment Reform Index 2010 examines the
institutional conditions and policy environment for
investment
• Increasing investment, and particularly private
investment in export-oriented greenfield projects, is
central to raising productivity (evidence exists of effects
of FDI on sectoral productivity in Croatia, Serbia,
Former Yugoslav Republic of Macedonia).
An overarching message
To improve the policy and institutional environment for
investment:
• There are some quick fixes…..
• …..but much of the needed improvement requires
medium to long-term capacity building.
• ….plus a parallel engagement of donors,
commitment to reforms by governments.
with
IRI 2010 covers 10 economies
Albania
Bosnia and Herzegovina
Croatia
Kosovo under UNSCR 1244/99
Former Yugoslav Republic of Macedonia
Montenegro
Serbia
With the financial
support of:
Moldova
Bulgaria
Romania
The European Union
The IRI 2010 measures reform in 8 policy dimensions
•
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•
•
•
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•
•
Access to finance
Investment policy and promotion
Trade policy and facilitation
Human capital development
Regulatory reform and parliamentary processes
Tax policy analysis
Infrastructure for investment
SME Policy
……..and part of a process launched at the RCC in
autumn 2008.
Stylized facts - investment in Western Balkans
• Investment rates well below the EU-8.
• Private investment as % of GDP also low compared to EU-10.
• Limited greenfield - much in real estate and construction, rather
than machinery and equipment.
• Privatisation a limited source of new investment (financial
services and telecomms almost fully privately owned in SEE).
Human Capital Development
•
An additional year of educational attainment in the
population raises the stock of FDI by 1.9% (Nicoletti et
al, 2003).
•
Increasing average educational attainment by one year
raises aggregate productivity by at least 5%, with
stronger long-term effects through innovation (de la
Fuente and Ciccone, 2003).
•
More skilled entrepreneurs tend to operate firms which
survive longer, grow faster and innovate more
(Koellinger, 2008).
•
Human
capital
is
particularly
critical
for
competitiveness in high-tech sectors (Bartelsman et al,
2004).
Human Capital Development – regional synopsis

Education system reform ongoing almost everywhere.
But…
 Misalignment between skills supplied and market needs:
 Almost nowhere are employers fully satisfied with the
employability of graduates.
 Private sector feels curricula are out of date.
 Significant demand from businesses for initiatives that
promote skills matching.
 Lack of practical training – excessively theoretical
curricula.
Investment Policy and Promotion – FDI policy

Non-discrimination firmly anchored in legal and
regulatory frameworks.
Restrictions to national treatment reduced in many
countries.

Subdimension average: FDI Policy
5
4
Score
3
2
1
0
AL
BA
BG
HR
MK
MD
Country
ME
KS
RO
RS
Investment Policy and Promotion –FDI policy (cont.)

Non-discrimination firmly anchored in legal and
regulatory frameworks.
But progress on land title registration and digitization of
cadastres slow, particularly in rural areas.

Subdimension average: FDI Policy
5
4
Score
3
2
1
0
AL
BA
BG
HR
MK
MD
Country
ME
KS
RO
RS
Investment Policy and Promotion – FDI policy (cont.)

Non-discrimination firmly anchored in legal and
regulatory frameworks.
Intellectual property right enforcement is improving, but
the pace is modest - estimates of pirated software in SEE
range from 54% in Croatia to nearly 90% in Moldova.

Subdimension average: FDI Policy
5
4
Score
3
2
1
0
AL
BA
BG
HR
MK
MD
Country
ME
KS
RO
RS
Investment Policy and Promotion – Promotion

Only two countries - Serbia and Croatia - and to a lesser extent
Former Yugoslav Republic of Macedonia, operate programmes
to link FDI and local businesses.
IPAs could do more to help investors navigate license and permit
approval procedures at the local level.

Subdimension average: Promotion and Facilitation
4
Score
3
2
1
0
AL
BA
BG
HR
MK
MD
Country
ME
KS
RO
RS
Access to Finance : Financial Instruments
•Bank lending dominant.
•Leasing companies operate
across the region (for some time),
but monitoring/regulation could
often be improved.
•Some recent development of
factoring services – Croatia.
•Despite some efforts to establish
framework
conditions,
risk
finance (VC, Business Angels…)
largely absent.
Access to Finance
Loan guarantees
•Growing number of guarantee
schemes – and donor support: but
limited-take-up.
•Most
developed
credit
guarantee schemes operating
in Croatia (and Romania).
•No Western Balkan economy
systematically collects data on
access to finance.
Trade Policy and Facilitation – Trade liberalisation
•Progress across much of the region.
•Bosnia and Herzegovina, Montenegro
and Serbia have made progress in
WTO accession negotiations.
5
4
•In 2008 interim trade measures with
EU entered into force for Bosnia and
Herzegovina and Montenegro and
were applied unilaterally by Serbia.
Score
3
•Customs duties on capital goods are on
average at OECD level.
2
1
0
ALB
BIH
HRV
XK
MK
Country
MD
MNE
SRB
Trade – NTBs - TBT and SPS measures
• Transposition of European standards
ranges from 1,200 adopted standards in
Kosovo under UNSCR 1244 to 21,368
in Croatia.
5
•Some notable areas of progress: in 2008
Albania adopted a new law on
accreditation
and
conformity
assessment; the former Yugoslav
Republic of Macedonia and Serbia are
aligning
legislation
with
EU
requirements.
4
Score
3
2
1
0
ALB
BIH
HRV
XK
Country
MK
MD
MNE SRB
•In the SPS area, all economies have
made progress in setting up institutions
and aligning legislation with the EU
acquis, but administrative capacities
remain weak across the region.
A few (random) parting thoughts…..
•There are some regional competitive advantages – build on
these.
•More research analysing this region in a global context.
•There are also some sectors common to the region –
opportunities for efficiency gains from regional collaboration.
•Build inter-firm networks - with concrete commercial
objectives.
•Need a high rate of opportunity-driven company births.
•Regional Competitiveness Initiative – Western Balkans.
All comments welcome:
[email protected]
THANK YOU