Transcript 1 - TCI Network

National Competitiveness Framework
Kevin X. Murphy, J.E. Austin Associates
Email: [email protected]
11th Global Competitiveness Conference
Capetown, South Africa, October 29, 2008
© J.E. Austin Associates
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Landscape of Competitiveness
United States
40,000
35,000
GDP per Cap 2004
PPP (current Intl $)
30,000
25,000
Korea
20,000
15,000
South Africa
10,000
China
India
5,000
0
0
1,000
2,000
3,000
4,000
Population (m, 2004)
Source: WDI, 2006; JE Austin Analysis. Excluding Luxembourg
5,000
6,000
7,000
What Explains National Competitiveness
Especially Among “Catch-Up Countries”?
Catch-up Countries
Break-out Countries
•Ireland
•Japan
•China
•Taiwan
•Hong Kong
•Singapore
•Thailand
•Vietnam
•Chile
•Korea
•Botswana
•UK
•United States
•France
•Germany
•The Netherlands
© J.E. Austin Associates
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National Competitiveness Framework
Launch regional and industry
cluster competitiveness initiatives
Facilitate technology
acquisition and innovation
Ensure modern and
well supervised
financial sector
10
1
World Class
Business
Environment
9
Mobilize Political Will
Gain Access to
Markets on Favorable
Terms
2
8
3
Productive
People
Strengthen institutions
and make it easy to do
business
Competitive
Competitive
Companies
Companies
4
7
Provide stable political,
macro-economic and social
conditions
Mobilize Investment
to Exploit These
Markets
6
© J.E. Austin Associates
Build Supporting
Infrastructure
5
Educate highly productive
people
4
Warnings, Caveats and Limitations
Of Any Economic Framework
-
There Are Many Points of Entry
There Is Logic to the Order but No Set Sequence
Not a Machine – But a Palette
Allows a Leader to Focus (100s of “Urgent Issues”)
Leads to Clear Delegation in a Cabinet Ministry
Question for YOU:
- Is This Relevant to Your Country?
- What Did We Miss?
- How Would You Change It?
© J.E. Austin Associates
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Mobilize Political Will
Creating the moral imperative
Mobilizing popular culture
Enlisting political leaders
Example: Ireland (messy democracy)
Example: Singapore, Korea, Taiwan (strong hand)
Example: China and Vietnam (Communist Party)
Changing mindsets is critical for sustainable change
© J.E. Austin Associates
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Gain Access to Attractive Markets
on Favorable Terms
Ireland  EU
Japan  USA, EU
Korea
Taiwan
Singapore
Vietnam  BTA
China  WTO
Counter Examples
– North Korea
– Cuba
– Myanmar
Irish Merchandise Exports by Region 1981-1990
Source: CSO, Trade Statistics
© J.E. Austin Associates
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Mobilize Investment to Exploit Markets
3
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Ireland, Singapore: Foreign Investment
Japan, Korea: Domestic Investment
Taiwan: SME Investment
Benchmarks:
– 15-19% of GDP in Private investment
– 5%+ in FDI
– Quality of investment
• Extractive versus productive
• Not just real estate speculation
• USSR: high investment/low ICOR
© J.E. Austin Associates
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Build Supporting Infrastructure
• Competitive countries moved quickly to build general and
specialized infrastructure
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–
–
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China: Special Economic Zones
Dominican Republic: FTZ’s
New York (1800s): Erie Canal
Netherlands: highly efficient logistics
Dubai: Specialized Zones
Sweden: Innovation and Science City
Korea: Knowledge City
Specialized infrastructure often supports and follows
the trade and investment strategy
© J.E. Austin Associates
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Educate Highly Productive People
• Ireland
– Eliminated school fees
– Upgraded universities
– Geared them to private sector demand
• USA
– GI Bill, Guaranteed student loans
• India
– IIT’s and IIM’s
– Catching up: primary and secondary
• Counter examples
– Sri Lanka, USSR,
• Attract talent from abroad
© J.E. Austin Associates
JOB AND WAGE COMPARISONS OF BLACKS AND WHITES - 1991
40%
R 12,000
Peromne
1-3
4-6
36.0%
Job Description
Top executive & most senior specialist
Senior management & high level
specialist
Middle & lower management,
superintendents & lower specialist
Supervisors & higher level skilled &
clerical staff
Lower level skilled & clerical staff
Very low skilled & unskilled
35%
7-8
9-11
30%
12-15
16-19
R 10,800
R 10,000
R 8,700
R 8,600
R 8,000
R 7,800
25%
1991
R 7,000
R 6,600
20%
R 6,000
R 5,500
18.0%
R 5,100
R 4,800
16.0%
15%
R 3,900
R 4,000
13.0%
12.0%
R 4,200
11.5%
R 3,000
11.0%
10%
10.0%
R 2,200
9.0%
8.0%
R 2,300
8.0%
7.0%
6.0%
7.0%
5%
5.0%
5.0%
2.5%
0.8% 0.6%
0.4% 0.3% 0.0%
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17
16
15
14
13
12
% Whites in Job
11
10
9
8
7
% Blacks in Job
Note:
Based on a survey of 222 620 employees
Source: Prof Robert Klitgaard, Development of Southern Africa, 1994
6
5
4
R 2,800
R 1,900
R 1,600
R 1,600
R 1,450
R 1,400
R 1,300
R 1,200
1.0%
1.5%
0%
19
R 1,920
R 1,610
R 2,000
2.4%
1.0%
R 3,600
10.0%
R0
19
18
17
16
15
14
13
White Wages
12
11
10
9
8
Black Wages
7
6
5
4
6
Provide Stable Political, MacroEconomic and Social Conditions
• Ireland: “Social Compact” Reduced Labor
Discord
– lower taxes = increased take-home pay
– reduced school fees
Wage restraint and social peace among labor
unions after severe unrest
• China:
– Predictable foreign exchange rates
– Predictable interest rates
– High foreign reserves
© J.E. Austin Associates
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Expose Domestic Economy to Market Forces
and Make It Easy to Do Business
Expose Domestic Economy to Competition
• Japan: two decades of stagnation: export
competitiveness is not enough
• US productivity boom of 1990’s = domestic
• Strengthen institutions
• Ensure rule of law
• Make it easy to do business
• Make Civil Service Civil and of Service
© J.E. Austin Associates
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Ensure Modern and Well-Supervised
Financial Sector
• 2008 Financial Crisis Threatens
Competitiveness of Many Countries
– Emerging Market Crisis (1980s)
– Asian Financial Crisis (1998);
– U.S. Savings & Loan Crisis (1980s)
– Global Financial Crisis (2008)
© J.E. Austin Associates
Causes of 2008 Financial Crisis
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2001 Stock Market declines  Excessively low US interest rates
Cheap Money  Asset inflation (not product inflation)
= Stock Market increases and real estate bubbles develop
 Risky mortgage lending (teaser rates; no collateral)
US consumer feels rich; assumes more and more debt
Banks package and sell loans to others (spreading contagion)
Yet US mortgages seen as virtually risk free (FNMA; FDMC)
Billions of unregulated derivatives (credit risk “guarantees”, etc.)
Derivatives mushroom and potential liabilities grow unseen
Financial authorities fail to anticipate potential risk
Credit boom fuels 4-5% global GDP growth
Commodity prices spike  Inflation  Credit tightening
Home foreclosures  Contagion  Bankruptcies Credit freeze
Massive intervention fails to arrest downturn; markets collapse
© J.E. Austin Associates
Three Possible Scenarios
1.
End of Credit “Super-Cycle” (George Soros Theory)
- Major downward adjustment in US standard of living
- Less ability to use US$ as reserve currency
- Global recession
- Further major decline in stock markets (Dow 5,000)
- Full economic recovery takes 10 years or more
2.
Financial and Economic Contagion Contained
- Massive liquidity pumped into global economy
- Global cooperation to stop downturn
- New reforms improve financial supervision
- Confidence restored; “Buying Opportunity” mentality
- Recession brief; bull market begins
3. Continued Financial and Economic Dislocation
- Continued “Main Street” damage
- Confusion for years
- Long and uneven recovery lasting 5-8 years
© J.E. Austin Associates
2008 Financial Crisis: Possible Implications for
Cluster Development
1.
2.
3.
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5.
6.
7.
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Less Private Co-Financing in Short-Term
Less Private Sector Cooperation in Short-Term
Revisiting of Boundaries of Private and Public Sectors
Increased Public Sector Role in the Economy
Increased Government Supervision
Focus on Finding Under-Utilized Assets
Potential Threats to Trade and Investment
Questioning of Accepted Economic Models
© J.E. Austin Associates
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Facilitate Technology Acquisition
and Innovation
• Technology Acquisition and
Licensing:
– Asian Productivity Organizations
– Licensing Regimes
– IPR
• Launching of Brands
– Samsung, LG
– “Ceylon Sapphire”
• Innovation Schemes
– Stanford and MIT Models
– Vinnova
– Innovation Journalism (Stanford)
© J.E. Austin Associates
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Specialized Initiatives:
Regional, Industry, Cluster and Policy
• Cluster Competitiveness Initiatives:
– 2,500 Identified by TCI
• National Competitiveness Initiatives:
– 30 Implemented
• Regional Economic Initiatives
• Industry Initiatives
• Other Thematic Initiatives
– Saudi Arabia 10x10 and Economic Cities
– Value Chain Initiatives
© J.E. Austin Associates
Murphy’s Laws:
Competitiveness for 2008
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In 2008, the Return Of Your Capital Is Now More Important Than
the Return On Your Capital
•
Prepare to Accept More Government Direction but Less Funding
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Please Make the Civil Service Both Civil and of Service
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In Uncertain Time, the Underlying Fundamentals of Cluster
Competitiveness Have Become More Important Than Ever
© J.E. Austin Associates
Is National Competitiveness Framework Relevant To YOUR Country?
Launch regional and industry
cluster competitiveness initiatives
Facilitate technology
acquisition and innovation
Ensure modern and
well supervised
financial sector
10
1
World Class
Business
Environment
9
Mobilize Political Will
Gain Access to
Markets on Favorable
Terms
2
8
3
Productive
People
Strengthen institutions
and make it easy to do
business
Competitive
Competitive
Companies
Companies
4
7
Provide stable political,
macro-economic and social
conditions
Mobilize Investment
to Exploit These
Markets
Build Supporting
Infrastructure
5
6
Educate highly productive
people
Email: [email protected]
© J.E. Austin Associates
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