Transcript Business Environment and Knowledge for Private Sector Growth

Business Environment and Knowledge for
Private Sector Growth:
Forum Closing Remarks
Fernando Montes-Negret, World Bank
Sector Director
Private and Financial Sector Development
Europe and Central Asia
Knowledge Economy Forum IV, Istanbul, March 2005
Outline: Closing Remarks
Key challenges ahead for the ECA Region
Business environment
Innovation
Skills for the Knowledge Economy
Looking ahead: policies for private sector
growth
Did we meet the Forum’s objectives?
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The world is moving fast…
…with or without you!
Increasing globalization: reduction of transportation &
communication costs, increasing global information,
increasingly mobile FDI. Rapid pace of technological
change and innovation.
Increasing competition, driven by trade liberalization
and increasingly larger players (e.g., China, Korea, India)
Demographic pressures: ECA faces declining and aging
populations.
Tighter regional integration: Joining a regional club
(EU and NAFTA, ASEAN +3) is useful, but not a panacea.
EU Membership opportunity, but not a guarantee
for success.
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Carl, Wim Kok
The world is moving fast…
…with or without you!
Trillions of 1995
international $
Real GDP (PPP): Projections 2004-2015 (Using 1991-2003 Average Growth Rates)
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India
Canada
Italy
Russian Federation
14
China
France
Japan
United Kingdom
Brazil
Germany
Mexico
United States
China
United States
12
10
India
France
8
Italy
Brazil
United
Kingdom
Russian
Federation
Mexico
Germany
6
Japan
Canada
4
2
0
2003
2005
2007
2009
2011
2013
2015
Carl
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Creating conditions for
sustainable growth is key
Productivity and growth: firms’ perspective
Access to credit for start up and operation
Infrastructure and Logistics costs
Labor costs
Information costs
Technology absorption, adaptation
and innovation
Skills of the labor force
Knowledge
Reduce Costs &
Improve Quality of
Supply
Business
Environment
Simplify interactions with the Government
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Key constraints in the business environment
in developing and transition economies
Key constraints to growth
Business
Environment Costs as % of Sales
30
Contract enforcement difficulties
Regulation
Bribes
Crime
Unreliable infrastructure
Percent of sales
25
20
20%
15%
15
10
27%
13%
8%
5
World-wide surveys


0
Poland
Poland
China
Brazil Indonesia
Indonesia Tanzania
Tanzania
China
Brazil
Policy uncertainty is the dominant concern. Improving predictability
can increase likelihood of investment by over 30%.
Business environment constraints are costly: (>8% of sales) Warrick
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Policy-Related Barriers to Competition
Stifle Innovation and productivity
Warrick 7
A better Investment Climate for all
Policies to reduce regulatory barriers: simplification
leading to a better investment climate for all, reducing
business risks, costs, and barriers to competition
(benefiting consumers through lower prices and more
innovative products);
Improving predictability of laws, regulations and
interpretation of norms, drastically reducing
legal/regulatory uncertainty;
Provision of a policy basic framework ensuring: stability
& security, sensible regulation & tax regime, good
infrastructure & logistics, access to finance, and a flexible
and fair labor market.
Persistence, not perfection in fostering reforms.
Fernando8
ECA has a Strong Scientific Tradition that
does not Translate into Innovation
Large S&T base, well-educated
workforce, culture of science…
…but limited R&D, innovation
and entrepreneurship
EU Target = 3%
Average new EU member states (EU10) = 0.8%
How can we move from science to innovation?
Technology absorption: get it from abroad
Commercialization of local S&T: develop it in-house
Increase access to finance for innovation
Fernando9
Technology Absorption: Attracting FDI,
Rooting MNCs Locally and Promoting Linkages
Most R&D and technology in non-OECD countries comes from
MNCs, but their investment goes mainly to South & East Asia.
ECA should become more integrated in the global
production network by attracting and retaining FDI,
creating linkages between foreign and local firms.
Cheap unskilled labor and protected markets not an option
Good investment climate; skills; training; quality standards and
technology; suppliers networks; logistics and ICT; FDI
promotion, including targeting of foreign firms; selected
incentives. (Ireland, Malaysia and Singapore cases).
Improve capacity of local suppliers with MNCs assistance
looking for long term viability
Governments have a role to play: matchmaking and information
dissemination and financing.
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Lall/Varney
Commercialization of Local S&T:
Get the Scientists Out of Their Ivory Towers!
Key to local innovation: strengthen university-firm collaboration
and commercialize university research.
Requirements:
Changes in the IP policy framework: giving IP rights to
universities.
Change in policies and in the culture of the academic and
business worlds: policy makers need to agree on quantity and
type of spending in R&D; researchers need to select R&D themes
that serve economic growth; the business community has to
engage scientists in problem solving.
Technoparks and incubators are not enough – without skilled
management with links to global markets, they may turn into real
estate development projects.
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Wessner/Lindholm/Brett.
Finance for Innovation:
Governments Have a Careful Role to Play
Getting the sequence right:
Risk Capital Markets / Venture Capital
On Finance for innovation:
Matching grants
Government risk sharing in
private risk capital funds
(US, UK, Israel)
Make R&D expenditures
tax deductible
But:
Avoid rent-seeking,
capture and moral hazard.
Grants, Credit, Technical Assistance
Innovative Skills
Protection of Intellectual Property Rights
Financial Markets and Financial
Information Infrastructure.
VC as a new financial industry.
Business Environment (Broad)
Fernando
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Venture Capital is not the only way to finance
innovation in ECA.
Realities of VC: need a significant number of bankable
projects. VC is highly selective: 1/200 firms in non-OECD
countries get funds.
Financing innovation w/o VC: the “Go Forward Plan”
Build on your comparative advantages.
Remember that technology can be embedded in very
traditional products and processes. All sectors can be hightech!
Characterize the deal flow – quality and performance.
Go after corporate investors (not financial investors) that do
business in your country and have a long-term perspective.
Create industry consortia: multinationals and private-public
local funds.
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Nastas
Human Capital –
“Crude Oil” of the 21st Century
Requirements of Knowledge-intensive economies
21st century jobs demand new skills and competencies
Employment security, not job security: LLL and flexibility
Without education innovation will not occur
Status Quo
Education and training systems are not meeting demands
High unemployment despite generally high enrollment and
high growth
Mismatch of skills and knowledge for future jobs
Lack of dynamic private sector (particularly SMEs) to
generate employment
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Education Panels --all
ECA Youth has difficulty applying skills
and knowledge acquired at school
Performance in all domains
Policy Challenge:
-Teaching
practical skills
-Improving
performance
indicators
-Aligning general
education and
vocational training
-Providing
equitable access
to life-long
learning
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Hong Kong
Finland
Korea
Netherlands
Liechtenstein
Japan
Canada
Belgium
Macao
Switzerland
Australia
New Zealand
Czech Rep.
Iceland
Denmark
France
Sweden
Austria
Germany
Ireland
Slovak Rep.
Norway
Luxembourg
Poland
Hungary
Spain
Latvia
United
Russian Fed.
Portugal
Italy
Greece
Serbia
Turkey
Uruguay
Thailand
Mexico
Indonesia
Tunisia
Brazil
Mathematics
Reading
Science
Problem Solving
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Acute Youth Unemployment in Candidate
Countries and South Eastern Europe
Key EU employment and education indicators
EU 25
CCs (2004)
(2004)
Unemployment Rate
9.0%
BG 12.2%
HR 14.3%
RO 8.1%
TR 10.7%
Youth Unemployment
BG 24.5%
HR 35.9%
RO 20.7%
TR 23.7%
The 3 EU Benchmarks in Education and Training
Early School Leavers (2004) 15.9%
BG 22.4%
% of 18-24 with at most
HR 8.4%
lower secondary education
RO 23.6%
(ISCED 2) and not in further
TR 52.9%
education
Youth Educational
76.4%
BG 76%
Attainment % of 20-24
HR 90.7%
having completed at least
RO 74.8%
ISCED 3 level (2004)
Lifelong learning (2004) %
9.4%
BG 1.3%
of 25-64 participating in
HR 2.1%
education and training
RO 1.6%
TR 2.3%
Source: Vincent McBride, ETF
EU2010
SEE (2004)
AL 15.0%
MK 35.8%
BA 43%
MON 23%
SR 20.2%
AL 35.5%
MK 61%
MON 51.3%
18.3%
10%
AL 61.2%
MK 36.2%
85%
12.5%
SR 3.8%
MK 1.9%
McBride
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Complementary roles of Government and
Private Sector in skills development
Provision of relevant quality
secondary education
Curricula for flexible and
transferable core skills
Certification to facilitate the
transferability and portability of
skills and competencies and
recognition of prior learning
Quality Assurance and Accreditation
for all forms of Lifelong Learning
Result: Broader participation and
increase labor market relevance
Provide Learner-Friendly Highperformance Work Environments:
Team-based learning
Access to Formal and Informal
learning opportunities (elearning)
Incentives for employees
In-company and external
knowledge networks
Recognition of prior learning
Lifelong Learning
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Complementary roles of Government and
Private Sector in skills development
Public Sector:
Develop and implement education policy, curricula, and
qualifications frameworks
Implement lifelong learning strategies through Public-Private
partnerships
Private Sector:
Education and training provision
Provide just-in-time in-company training
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Looking ahead:
Key policies for private sector growth
 Stabilize policy environment
 Implement microeconomic reforms for a better business
environment
 Absorb technology by attracting and retaining FDI and creating
linkages between foreign and local firms
 Improve local innovation by strengthening university-firm
collaboration and commercializing university research
 Governments have a role to play in facilitating access to finance
and promoting technology start-ups. Public-private industry
consortia are a viable alternative to VC in very early stages.
 Enable application of knowledge by teaching practical skills
 Align general and vocational education to improve the skills of the
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labor force
Did we meet the Forum’s Objectives?
Yes IF:
Generated new ideas
Shared relevant experiences
Identified specific lessons in the three critical
areas discussed (business environment,
innovation and skills)
Identified follow-up actions (country cases)
Established networks for continuous sharing and
learning
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Knowledge Economy Forum:
Documents
www.worldbank.org/eca/ke
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