Estrategias de desarrollo: Retos y respuestas para los países de renta media – Expositor Mario...
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San José, Costa Rica July 31st, 2012 José Ramón Perea Annalisa Primi OECD Development Centre
Transcript of Estrategias de desarrollo: Retos y respuestas para los países de renta media – Expositor Mario...
San José, Costa RicaJuly 31st, 2012
José Ramón Perea Annalisa Primi
OECD Development Centre
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Outline of the report
1. Costa Rica as a knowledge economy: achievements and challenges
2. Strategy, governance and policy mix for attracting knowledge-intensive FDI to Costa Rica
3. A road map for policy action
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A long-standing democracy and a stable macroeconomic environment
Robust GDP growth since the 60s, only halted with the arrival of the Debt Crisis.
GDP growth, Costa Rica, 1960-2011
Source: Authors’ calculations based on World Bank data.
- Post-crisis performance characterized by greater GDP growth volatility, although better than many other Latin American countries.
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A remarkable record in per capita income
GDP growth patterns has left Costa Rica with one of the highest per capita income level of the region.
- By 2009, Costa Rica’s per capita income was the fourth highest among a comprehensive sample of Latin American countries.
- Growth has facilitated the task of poverty alleviation, which is reduced substantially. Extreme poverty is reduced more acutely.
Latin America, GDP per capita1985-2009
Source: Authors’ calculations based on Penn World Tables.
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Costa Rica relied heavily on FDI attraction
Source: Authors’ calculations based on World Bank data
FDI, selected economies, 1985-2010(net inflows as percentage of GDP)
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Number of companies in knowledge-intensive activities,Costa Rica, 1960-2011
A proven track record in FDI attraction
Source: CINDE, April 2012.
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FDI became a stable source of external financing
Balance of payments, Costa Rica, 1990-2010
Source: Authors’ elaboration based on International Monetary Fund (IMF).
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FDI contributed to job creation
Number of jobs created by FDI projects in Costa Rica by sector (2003-05 and 2009-11)
Note: Total number of FDI-related jobs created for each period for green field projects: 2003-05:7 758 jobs; 2009-11: 34 385 jobs.Source: Authors’ calculations based on fDi Intelligence, 2012.
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Costa Rica evolved from an export structure which was highly concentrated on agricultural products and textiles and garments…
Costa Rica: Product Space
(1988)
FDI fostered export diversification and upgrading
Source: Authors’ calculations based on Feenstra et al. (2005).
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…to a more diversified export structure with new, more sophisticated products.
Costa Rica: Product Space
(2008)
- Costa Rica is an “outlier” in the Product Space: the accrual of export-oriented FDI to technology-intensive sectors allowed the country to “jump” into areas far from the country’s original competitiveness
Source: Authors’ calculations based on COMTRADE.
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But ... Costa Rica needs to strengthen its national innovation system
The commitment to invest in innovation is very low
R&D intensity and the role of the private sector,OECD and non-OECD economies, 2009
Source: Authors’ calculations based on data from UNESCO, RICYT and the OECD Main Scienceand Technology Indicators database.
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Skills are a critical factor for FDI attraction, but...
Notes: Often more than one investment motive is recorded for any investing company; hence the sum of share of companies mentioning a certain motive exceeds 100%. The share of companies for which investment motives are recorded over the total number of investing companies varies by country: Costa Rica: 51.1%, Malaysia: 51.3%, China: 38.4%, India: 43.6%. Data recorded from Jan 2003 - March 2012. IPA means Investment Promotion Agency.Source: Authors’ calculations based on fDi Intelligence data, 2012.
Determinants of FDI in Costa Rica and in selected economies,2003-12(% of total motive-citing investing companies)
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Profile of PhDs by area of specialisation, shares over total, Costa Rica, Chile and Mexico, 2000-09
...there is a mismatch between skilled-labour supply and production structure needs.
Source: Authors’ calculations based on RICYT data.
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Linkages between foreign and domestic companies are also low
due to several reasons:
Limited access to finance for domestic companies
Lack of certifications and standards
Low domestic capabilities
Little demand from MNCs
Domestic credit provided by the banking sector, 2010 (% GDP)
Source: Authors’ elaboration based on World Bank data.
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1. Costa Rica as a knowledge economy: achievements and challenges
2. Strategy, governance and policy mix for attracting knowledge-intensive FDI to Costa Rica
3. A road map for policy action
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- Target of attracting USD 9 billion by 2014, half of which should come from productive investment.
The national strategy for FDI in Costa Rica: prioritising knowledge-intensive FDI
3 approaches to FDI attraction:
Horizontal Selective Systemic (or Integrated)
Costa Rica
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The challenge of clarifying the objectives
Policy priorities for FDI attraction in innovation-related activities
Note: x indicates the level of priority (x = priority; xx= higher priority).Source: Authors’ elaboration based on OECD (2010) and consultations with Costa Rican Government institutions carried out by the OECD Development Centre in 2011.
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The challenge of increasing policy co-ordination
Note: COMEX and MICIT interact with other ministries in designing and implementing FDI policies, including the Ministry of Planning, which is in charge of setting overall national development targets, and the Ministry of Education.Source: Authors’ elaboration.
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The challenge of managing a more complex policy mix
Policy mix
Framework conditions
Investment promotion
Fiscal incentives
Incentives for talent creation and retention
Incentives for innovation and S&T
development
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The challenge of facing a new scenario
Rising competition to attract high value added and knowledge-intensive FDI
New potential investors, beyond additional partners
Rising uncertainty regarding the future of production unbundling
Learning in policy making in Costa Rica Accumulated business capacities Rising prioritisation of innovation in Latin
America
Global changes
Domestic changes
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The new landscape requires an enhanced policy framework
Source: Authors’ elaboration.
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A Road Map for policy action: what are the suggested actions?
1. Strengthening political leadership and horizontal co-ordination
The Presidential Council for Competitiveness and Innovation needs to have more enforcement power to elaborate shared guidelines and priorities to foster policy co-ordination
2. Increasing diagnostics capabilities
Creating a small and agile observatory-type institutionunder the direction of the Presidential Council for Competitiveness and Innovation could help in monitoring policy implementation and assessing impact.
3. Promoting the culture of a knowledge-driven society
Avoiding the risk of dualism FDI and the rest of the economy can be tackled also through culture.
Costa Rica needs to break the vicious cycle that simplistically associates knowledge and technology with foreign action and traditional activities with domestic agents.
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Road Map for Policy Action
4. Updating the country branding and fostering outreach
Additional effort is needed to familiarise potential investors – and the global community in general – with the new Costa Rica.
5. Diversifying and updating investment promotion activity
Investment promotion in Costa Rica has been very effective, but there is a need to look at other markets as potential sources for FDI .
6. Improving the quality and supply of the skilled labour force
Need to increase the quality and quantity of the skilled labour force, especially in science and engineering.Costa Rica could create a fund for skills developmentsupported by contributions from the government and MNCs.
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Road Map for Policy Action
7. Improving the policy mix and channeling more resources to innovation
Increase the budget for innovation policyImprove the policy mix (ex. Business incubators and new generation of techno parks) Improve the design of innovation incentive schemesFostering the development of linkages between MNCs and domestic companies
8. Improving local research capabilities
Strengthening its research capacities in universities and research centers. Costa Rica’s small size is a critical factor. The country will need to take a selective approach
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Conclusions
Prioritising knowledge-intensive FDI is a strategic option for Costa Rica. However, this is not a low-hanging fruit. It will require strong government commitment, leadership, horizontal co-ordination and financial resources.
The enhanced policy framework will not be a “zero-cost” change, as it will require mobilising higher public resources.
Higher resources are not in themselves a guarantee of success; they require effective planning and management; but below a critical mass of public budget, even the most well-designed plan will face implementation obstacles. This is even truer in innovation-related domains, where public effort needs to be backed by private investment .
