Transcript Presentation

KNOWLEDGE PERSPECTIVE ON
ECONOMIC POLICY IN EU
ACCESSION COUNTRIES
Knowledge Economy Forum
February 2002
World Bank
Paris
INGREDIENTS OF A KNOWLEDGE
ECONOMY
Economic policy conducive to the
establishment of a knowledge based
economy
Building an efficient ICT infrastructure
Education system which trains knowledge
workers
Fostering innovation systems serving
private and public institutions
ECONOMIC POLICY
FUNDEMENTALS
 Price and trade liberalization
 Hard budget constraint on banks and enterprises
 Enabling environment for private sector,
particularly new enterprises
 Tax system and public expenditure program
which promotes enterprise and government
efficiency and fiscal balance
 Stable macro-economic policy
 Adequate financial market regulation
Source: de Melo, Denizer, and Gelb 1996; EBRD 2000.
Turkmenistan
Belarus
Tajikistan
Uzbekistan
Azerbaijan
Ukraine
1995
Russian Federation
Albania
Armenia
Romania
Moldova
Georgia
FYR Macedonia
1998
Bulgaria
Kazakhstan
Kyrgyz Republic
Croatia
Lithuania
Latvia
Slovenia
Slovak Republic
Estonia
Czech Republic
Poland
Hungary
Liberalization Index
EU ACCESSION COUNTRY
ECONOMIC POLICY
PERFORMANCE
Progress in policy reform, 1990s
1990
1.0
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0.0
ECONOMIC GROWTH HAS
RESPONDED TO POLICY
Regression of annual output growth on policies and initial conditions allowing for
differential effects early in transition, 1990–99
Exogenous variable
Endogenous variable: Annual rate of growth
1990–99
Coefficient
t-value
–11.01**
–4.08
8.92**
2.60
3.32
1.60
8.26**
2.02
–4.03
–0.71
–2.18
–0.60
–11.52**
–5.45
0.09
0.38
1.82**
4.50
0.60
(200)
6.89
Liberalization (t)
Liberalization (t – 1)
Liberalization (t – 2)
Liberalization (t), 1995–99a
Liberalization (t – 1), 1995–99a
Liberalization (t – 2), 1995–99a
WAR
Initial conditions
Initial conditions, 1990–94b
R-squared (number of observations)
Standard error of estimate
** Significant at 95 percent.
a The coefficient for these variables measure the additional effect of liberalization during 1995–99.
b The coefficient for this variable measures the additional effect of initial conditions during 1990–94.
Source: Martin 2000.
NEW ENTERPRISES ARE MORE
PRODUCTIVE THAN OLD
Share of employment in small enterprises, 1989–98
60
Hungary
50
Czech Rep.
Poland
Percent
40
Lithuania
Latvia
30
Russian Fed.
20
Ukraine
Belarus
10
Kazakhstan
0
1989
1990
1991
1992
1993
1994
1995
1996
1997
Source: World Bank database on small and medium-size enterprises
1998
Performance of old and new enterprises, 1996–99
Sales
15
10
5
Debt
0
Investment
-5
New enterprises
Old enterprises
Export
Source: Hellman, Jones and Kaufmann(2000).
Employment
Changes in real output, 1990–2001
120
Index (1990 = 100)
110
100
CSB
90
80
Europe and Central Asia
70
CIS
60
50
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
Note: Europe and Central Asia is the average of Central and Southeastern Europe and the Baltics (CSB)
and the Commonwealth of Independent States (CIS). All aggregates are population-weighted. Values for
2001 are projected.
Source: World Bank country offices.
WHAT MORE SHOULD ECONOMIC
POLICY DO TO CREATE A KNOWLEDGE
ECONOMY?
Is there more to it than good innovation
policy, investment in higher education, and
investment in ICT?
Will these additional policy measures,
whatever they are, stimulate faster
economic growth?
BALLYHOURA, IRELAND
 Community consultative group
 Audit of skills by University of Dublin
 EU Leader funds
 Vocational training for adults
 Rural tourism
 Small scale enterprises
 Agricultural innovation
 Information technology and knowledge sharing
BALLYHOURA WAS
TRANSFORMED
New agricultural technologies
Cooperative marketing
Training in Information technology
Telemarketing
Rural tourism
Knowledge was critical; but so was local
initiative
BROADER LESSON: IRELAND PUT IN
PLACE SOUND ECONOMIC
FUNDEMENTALS
 Fiscal soundness
 Good exchange rate management
 Tax policy and regulatory framework which
encouraged new business start-up and
profitability
 Market discipline imposed on public enterprises
 Corporate oversight
 Efforts to attract foreign investment
 Government investment in R & D
THE ECONOMIC BOOST IN EU
ACCESSION COUNTRIES CAN COME
FROM TECHNOLOGICAL ADVANCE
Advanced countries have economic
policies which encourage innovation
EU accession countries must move from
investment driven to innovation driven
(Global Competitiveness Study)
THE MOST ADVANCED ECONOMIES ARE INNOVATIVE
World Economic Forum
Global Competitiveness Report 2001/2002 (Jeffrey Sachs, Michael Porter, et al)
Global Competitiveness Index – GCI / Current Competitiveness Index – CCI
T
e
c
h
n
o
l
o
g
i
c
a
l
C
o
r
e
E
c
o
n
o
m
i
e
s
Finland
United States
Canada
Singapore
Australia
GCI
1
2
3
4
5
CCI
1
2
11
10
9
Norway
Taiwan
Netherlands
Sweden
New Zealand
6
7
8
9
10
19
21
3
6
20
Ireland
United Kingdom
Hong Kong SAR
Denmark
Switzerland
11
12
13
14
15
22
7
18
8
5
Iceland
Germany
Austria
Belgium
France
16
17
18
19
20
16
4
13
14
12
Japan
South Korea
Israel
Italy
21
23
24
26
15
28
17
24
GCI
28
29
31
CCI
26
27
32
Greece
36
43
Czech Republic
Slovak Republic
Poland
Lithuania
Latvia
Romania
Bulgaria
37
40
41
43
47
56
59
35
39
41
49
42
61
68
Hungary
Estonia
Slovenia
THE INGREDIENTS OF MOVING TO AN
INNOVATION BASED ECONOMY ARE
MANY
World Econmic Forum
Global Competitiveness Report 2001 / 2002
(Jeffry Sach, Michael Porter, et al)
Global Competitiveness Index & Subindex
GCI
Total
Hungary
Estonia
Slovenia
Czech Republic
Slovak Republic
Poland
Lithuania
Latvia
Romania
Bulgaria
28
29
31
37
40
41
43
47
56
59
Technology
Estonia
Czech Republic
Hungary
Slovak Republic
Slovenia
Latvia
Poland
Lithuania
Romania
Bulgaria
Public Institutions
8
20
21
29
30
34
35
41
47
50
Hungary
Estonia
Slovenia
Lithuania
Slovak Republic
Poland
Latvia
Bulgaria
Romania
Czech Republic
26
29
30
34
38
41
48
51
52
53
Current Competitiveness Index & Subindex
CCI
Total
Hungary
Estonia
Slovenia
Czech Republic
Slovak Republic
Poland
Lithuania
Latvia
Romania
Bulgaria
26
27
32
35
39
41
49
42
61
68
Company Operations &
Strategy Rankings
Slovenia
Estonia
Hungary
Latvia
Czech Republic
Lithuania
Poland
Slovak Republic
Romania
Bulgaria
28
32
33
35
41
47
55
57
63
70
Quality of the National
Business Environment
Hungary
Estonia
Czech Republic
Slovenia
Slovak Republic
Poland
Latvia
Lithuania
Romania
Bulgaria
25
26
33
35
36
40
43
48
61
65
Macroeconomic Environment
Hungary
Slovenia
Estonia
Czech Republic
Poland
Lithuania
Latvia
Slovak Republic
Romania
Bulgaria
38
39
43
49
50
56
59
64
67
69
INVESTMENT DRIVEN ECONOMIES: THE
CURRENT PHASE OF EU ACCESSION POLICY
Harness technology from elsewhere
Foreign investment is key
High rates of investment
Enhance legal systems to support business
efficiency
Attract new investors
Discipline old less innovative companies
EU ACCESSION COUNTRIES: COMPLETE BASIC
ECONOMIC REFORM; AND ADD POLICY CONSISTENT
WITH CREATING A KNOWLEDGE BASED ECONOMY
 Eliminate subsidies to non-innovating old enterprises (mostly in







agriculture, coal, mining, railways, shipbuilding, and steel)
Regulatory development for the financial system and creation of
sophisticated capital markets, including a regulatory environment that
encourages venture capital
Better protection of intellectual property rights
Policies to increase labor market flexibility (reduced mobility
restrictions, low minimum wages, reduced termination restrictions)
Effective social safety net (coordinated pension, unemployment and
social assistance schemes)
Continued building of legal and judicial institutions, with
accountability of government
Improved allocation of public expenditure, including more funding of
R & D, and of higher education, while maintaining fiscal stability
Policy to continue to reduce cost of start up by small and medium
enterprises
Quality of judiciary in transition economies
(Percentage of enterprises that complain that courts sometimes, seldomly, or never
exhibit positive qualities when resolving business disputes)
100
90
80
60
50
40
30
20
10
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La
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Al a
ba
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a
0
Sl
Percent
70
Unfair (a)
High Cost (b)
Weak Enforcement (c)
(COMPANIES NEED TO
CHANGE (DRUCKER)
Corporate governance needs reform;
companies to focus on innovation, reduce
hierarchy
Buyers, suppliers, producers are linked in
network arrangements
Firms invest in training and skills upgrade
(knowledge workers dominate)
Firms become global players