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  • The MENA Report on Policies for Sustainable Competitiveness

    PROPOSED FRAMEWORK AND ROADMAP

    31st March 2010, Tunis

    OECD Private Sector Development Division

  • Agenda

    2

    1. Overview and Aims

    2. The Approach

    3. Calendar and next steps

  • Overview of current work on competitiveness

    Global Regional National

    Global Competitiveness Index (WEF)

    CGI Arab World Competitivenss Report

    Many countries have adopted different approaches, e.g. -Saudi Arabia adopted an approach based on the Porter Diamond -Egypt adopted WEF -Tunisia has an original approach with internal and external competitiveness

    World Competitiveness Index (IMD)

    Business Competitiveness Index (M. Porter)

    Global Innovation Index (INSEAD)

    Network Readiness Index (INSEAD)

    3

  • Key questions

    1. How have the MENA countries performed historically in the global competition for investment and talent?

    What is the track record on performance, measured as GDP growth, job creation, investment, Human development Index, happiness,

    How do those output (dependent ) variables compare across the region and with OECD and Emerging Markets best practice?

    Which were the successful and unsuccessful policies in the past, and what are the lessons learnt?

    2. What are the priority Government actions to put in place in order to improve their

    competitive position? Priority policy reforms which can achieve maximum impact with minimum risk Priority investment for the budget with best impact at lowest cost

  • MENA-OECD Sustainable Competitiveness Objectives correspond to identified needs

    Gap Analysis

    Even though national competitiveness

    bodies exist, there are several gaps:

    Heterogeneous methodology and thus limited comparability of data across countries

    Insufficient understanding of cause to effect links between policies and performance

    As a result, no efficient decisionmaking tool to prioritize Government action

    Project Objectives The objective of the MENA Sustainable

    Competitiveness Report is to partially fill these gaps:

    Introduce a shared methodology and set of

    indicators which enable benchmarking and best practice sharing

    Improve understanding of linkages between policy and performance

    Provide insights from the above analysis and apply to specific MENA country situations

  • Basic principles

    Need a pragmatic approach to competitiveness, based on MENA countries needs. In particular, a need to be forward-looking

    Emphasize system dynamics links between the inputs (policies, government investment) and output (business performance, productivity, labor and costs)

    Competitiveness is a process: role of national competitiveness bodies as advisor and consensus builder around a set of indicators leading to actionable advice to policymakers

    Benefit from inputs from other working groups: WG1: Investment Policies and Promotion WG2: SME Policy, Entrepreneurship and Human Capital Development WG3: Tax Policies WG4: Financial Markets WG5: Corporate Governance

  • Agenda

    7

    1. Overview and Aims

    2. The Approach

    3. Calendar and next steps

  • MENA-OECD Sustainable Competitiveness Objectives correspond to identified needs

    Project Objectives The objective of the MENA Sustainable

    Competitiveness Report is to partially fill these gaps:

    Introduce a shared methodology and set of

    indicators which enable benchmarking and best practice sharing

    Improve understanding of linkages between policy and performance

    Provide insights from the above analysis and apply to specific MENA country situations

    Modules Module 1: Measurement of sustainable

    competitiveness for the MENA countries according to a common framework

    Module 2: Econometric and qualitative analysis (regressions and case studies) of data from OECD, BRIICS and MENA countries

    Module 3: Lessons learnt and policy recommendations (hypothesis driven approach)

  • Module 1: Measurement of Sustainable Competitiveness

    Framework with input and output indicators

    A database with up to date information for the last 10 years

    Agree on a common framework Populate database

    Deliverables

  • Module 2: Econometric and Qualitative Analysis

    Evolution of competitive and comparative advantage, measured as the slope () and intercept () of export market share vs. Technological content

    Significance and magnitude of correlation between and and the independent variables (policy inputs)

    Case studies based on a hypothesis-driven approach explaining observedevolutions of competitiveness

    Regression of trade data Econometric analysis Qualitative Analysis

    Deliverables

  • Module 3: Policy recommendations

    Deliverables Benchmark the different performance and input variables between MENA countries and benchmarks (OECD, BRIICS)

    Explain differences based on a hypothesis-driven approach

    Pick learnings from econometric and qualitative analysis relevant to decisionmaking

    Formulate relevant government action (reform, investment,)

    Prioritize according to impact and feasibility

    Analyse and compare Lessons learnt Formulate recommendations

  • Proposed report structure

    Report Structure

    1. Executive summary

    2. Approach and methodology

    3. Competitiveness Measurement

    a. Sustainable Growth

    b. Performance: Business performance, productivity, costs, labor

    c. Policy Inputs: Business Environment, Physical and Knowledge Infrastructure

    4. Links between Policy inputs and Performance

    a. Evolution of competitive advantage measured as technological content of

    exports

    b. Correlations between Policy input and competitive advantage

    c. Selected Case Studies

    d. Lessons learnt

    5. Policy recommendations

    1. Investment policy

    2. Investment promotion

    3. Tax

    4. Gender equality

    5. Skills development

    6. Governance

    7. Financial regulation

    8. Sector focus: Information and Communication Technology, Electricity,

  • Agenda

    13

    1. Overview and Aims

    2. The Approach

    Module 1

    Module 2

    Module 3

    3. Calendar and next steps

  • Module 1: Measurement of Sustainable Competitiveness The Pyramid as the framework linking policy and performance

  • Module 1: Measurement of Sustainable Competitiveness The bottom measures indicators subject to government action

    Tax

    Legal environment

    Access to finance

    Telecommunications

    Transport

    Energy

    Water

    Land

    Research&Development

    Education

    Health

  • Module 1: Measurement of Sustainable Competitiveness The middle measures competitiveness performance

    Investment

    Trade

    Competition

    Technological readiness

    Management

    Entrepreneurship

    Factor productivity

    Innovation

    Inflation

    Cost of labour

    Cost of financing

    Labour force

    Employment

  • Module 1: Measurement of Sustainable Competitiveness The top measures sustainable growth

    Income

    HDI

    Happiness

  • In addition to statistical indicators, we use indicators for

    policies hich are measured against OECD best practice

    I-1 FDI Policy

    1.1 Non-discrimination

    1.2 Protection of property

    1.3 Investor protection

    1.1 Non-discrimination

    1.1.1 Restrictions to national treatment

    1.1.2 Review of restrictions to national treatment

    1.1.3 Approval procedures

    1.1.4 Admittance of business personnel in support of FDI

    1.1.5 Transfer of FDI-related capital

    1.1 Non-discrimination

    Level 1 Level 2 Level 3 Level 4 Level 5

    1.1.2 Review of restrictions to national treatment

    The government does not undertake any reviews of its restrictions to national treatment.

    The government has committed to designing a process to review restrictions to national treatment.

    The review process consists of benchmarking the scope of restrictions to national treatment in its laws and practices with other similar economies.

    Level 3 plus the process involves periodically reviewing the list of restrictions based on an analysis of their costs and benefits and a regulatory impact analysis.

    Level 4 plus the review process includes the canvassing of views and observations of national and international investors and other relevant stakeholders.

    BCDS Dimension

    BCDS Indicator

    Each indicator is broken down into 5 levels of excellence 18

  • Agenda

    19

    1. Overview and Aims

    2. The Approach

    Module 1

    Module 2

    Module 3

    3. Calendar and next steps

  • Approach: lacking data on productivity, we propose to use export performance as a proxy

    20

    We suggest to use a measure of export performance: Market share of exports as a function of technological content

    Market

    share

    Technology/skill

    content

    Highly developed country has

    higher market share in high tech Market

    share

    Technology/skill

    content

    Less developed country has higher

    market share in low tech

    y = + x

    y = + x

  • Measuring slope and intercept over time gives an idea about