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Development Options for Suriname in light of globalisation trends and negotiations at WTO and FTAA Dr. Raymond SanerUniversity of Basle, Switzerland & Centre for Socio-Eco-Nomic DevelopmentGeneva, www.csend.org

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Objective of Presentation:Part I

To provide an overview of the field of national competitiveness & globalisationTo examine the linkage between quality of human resources and business competitiveness and to explore relevance for Suriname

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Objective of Presentation:Part II

To provide an overview of the current developments in trade negotiationsTo raise issues pertaining to linkages between economic development and trade strategies for Suriname

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Sources of Information Utilized re: Suriname

UNCTAD, WTO, IMF, OECD, CSENDRosalea Hamilton, UNDP Project SUR, 2003“Implications for SUR’s Economy of the WTO, FTAA, CSME and ACP/EU Trade Agreements”Vanus James, UNDP Report, 2001, “Poverty Eradication Plan of Suriname”

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Changing Landscape

Globalisation of world economyProliferation of information and communication technology

21st Is Driven by 2 Complementary “Revolutions” --

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Globalisation Means….

Worldwide standardisation of customer needsWorldwide product awarenessWorldwide standardisation of product technologyWorldwide market presence of key competitorsWorldwide marketing of standardised products

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Examples

Watches and partsTextile machineryMining machineryOilfield machineryConsumer electronicsSemi-conductors

Sew machineryElectro-medical apparatusSynthetic insecticides and fungicidesCivil aircrafts and partsTypesetting machinery

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Changing the Rules of the Game

Comparative

Advantages

Competitive Advantage

s

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Stages of National CompetitivenessSource: adopted from M. Porter, 1990

Factor-Driven

Investment- Driven

Innovation- Drive

Wealth-Driven ?

Advance Decline

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Success Factors of National Competitiveness (Source: Michael Porter, 1990)

Government

ChanceFirm strategy,

structure & rivalry

Demand conditions

Related & supporting industries

Factor Conditions

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Factors with the most decisive influence on comparative advantages of a region with a future

(Ch. Koellreuter, BAK, 1997)

1 Availability of highly skilled labour

2 Price/performance of h. skilled labour

3 Permits (legislation, processing)

4 Corporate tax system

5 Price/performance of skilled labour

6 Availability of skilled labour

7 Work permits of transnational labour

(1)

Ranking Factors

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Factors with the most decisive influence on

comparative advantages of a region with a future (BAK survey, 1997)

8 Telecommunication

9 Quality of life

10 Access to EEA (EU) market

10 Working Hours

10 Predictability of the politico-legal environment

.. ……

25 Price/performance of unskilled labour

(2)

FactorsRanking

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Knowledge Based Capital

“Knowledge is the only meaningful resource today. The ‘traditional factors of production’… land (e.g. natural resources), labour and capital…have not disappeared, but they have become secondary. They can be obtained, and obtained easily, provided there is knowledge.”

Peter F. Drucker

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Result?

Eroding the cost advantage that has been long enjoyed

by newly industrialised and developing countries!

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Result?

Countries compete on Competitive Advantage, NOT anymore on

Comparative Advantage! &

Same is true for the companies!

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What is Knowledge Society?

“Knowledge in this new meaning is knowledge as a utility, knowledge as the means to obtain social and economic results.”

(Peter F. Drucker)

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Implications?Even greater demand on high quality human resourcesAccepted need and practices for life long learning and continuing educationIncreased cross-border mobility for talents (greater brain drain)Greater commitment for development of human capital by the countries and by the world class corporationsPursuit of intellectual capital formation Defending of intellectual property rights

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“In today’s economic world, countries without educated work forces simply cannot set sails economically – what ever their desires……. If countries cannot organise good education systems, there is no such thing as catching up economically.” (March, 2001)

Lester C. Thurow, MIT Bus Schoolon Quality of Education

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“If companies cannot organise good management development and training systems, there is no such thing as sustainable economic performance.”

Building on Lester C. Thurow in regard to Quality of Management Development

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Strengthening Enterprises’ Competitive Advantage

A priori is through

• availability of high quality human resources to recruit from (government responsibility)

• investment in human resource development and training to sustain competitive advantages(enterprise responsibility)

The urgent need to reassess the existing training and development programmes and

to ensure the quality of new ones

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Application to Suriname 2a

The analysis suggests that the fundamental missing element of the development strategy is that of the expansion of output and export potential and demand through investment in the capacity to innovate and make exports autonomously more attractive. …It is characteristic of Suriname and other Carribean economies that innovation is done mainly through imported ideas, machinery and equipment (p.76)

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Application to Suriname 2b

The survey results suggest that need for more training and research to address the knowledge deficiency of the trading environment and to strengthen the human capacity to deal with trade matters. The survey suggests that there is need for Suriname to improve negotiating capacity by improving skills sets and improving the consultative mechanism (p.83) (Source: Rosalea Hamilton, UNDP, 2003)

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Application to Suriname 2c

Preparation through schooling must now focus on the ability to learn, diagnose, and to make innovative solutions with the information acquired. Thus, education must now foster an independence of spirit and analytical ability. Such preparation is achieved only through lifelong learning oriented heavily towards problem-soling and practical application.(p.7) (Source: Vanus James, UNDP, 2001)

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Conclusion 1: Part I

Competition of the 21st century is a race of knowledge creation and applicationKnowledge society requires knowledge workers which in turn demands quality education and training at ALL levelsCompanies are embedded in the countries/regions that they operate in. Available human resources are constrained by the quality of existing education and training services

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Conclusion 2 : Part I

Developing Countries who base their development strategy on commodities and cheap labour cannot count on sustainable economic and social development. Globalisation means interdependence across borders. No country can stay aloof of this trend without seriously endangering its futureFDI flows to countries that can guarantee stable economic and social development, the rule of law and can offer a skilled and motivated work force.

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Trade & Development options for Suriname : Part II Dr. Raymond SanerUniversity of Basle, Switzerland & Centre for Socio-Eco-Nomic DevelopmentGeneva, www.csend.org

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Effects of trade liberalisation since 1995 (Source: Rosala Hamilton, 2003)

The empirical evidence suggests rather strongly that trade liberalisation as championed by the trade agreements, coupled with exchange rate liberalization as recommended by the IMF, has not proven to be strong medicine to solve the development problems of Suriname. The available evidence is that the downward adjustment of the tariff has generated very little positive growth stimulus for trade and even more importantly for GDP growth. (p.8)

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Effects of trade liberalisation since 1995 (Source: Rosala Hamilton, 2003)

The existing trade agreements and those being negotiated all focus primarily on substantial tariff reduction and promise to yield growth in export demand and growth in output. The bulk of Suriname’s revenue from trade come from customs duties, total statistical and licensing fees, and consent rights. These are also the tariffs that have been subject to the most reduction since 1990, leading to a fall in Government revenue and a reduction in Government’s ability to sustain budgetary support for unprofitable state enterprises and to manipulate the economy through the budget. (p.8)

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Tariff Regimes

In compliance with CARICOM, SUR is supposed to bring tariffs fully in line with the Common External Tariff (CET) resulting in an estimated revenue loss of SRG 11.5 billion. (R. Hamilton, 2003)WTO rules consist of applying MFN to all WTO members, observing NT/MA non discrimination and adhering to Bound Tariff Commitments.Regional Trade Agreements (RTAs) like CARICOM cannot discriminate against non RTA members, e.g. by raising tariffs against other WTO members.Consequence: SUR tariffs can only go further down, hence revenue loss appears certain and need for competitiveness of the economy is a must.

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Boston Consulting Grid

-MARKETS

STRENGHT

++ Revenues / Profits -

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SWOT - Suriname

WeaknessesNo sectoral strategyPolitical fragmentation ?

__________________Threats

Substitutions of products ?MNC Bargaining Power ?

StrenghtsMineralsForestsDutch + Identity

__________________Opportunities

Tourism ?Agro products ? ?

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FDI for Suriname, yes IF:foreign investors practice good Business Diplomacy (e.g. Shell in Nigeria: build roads, schools, hospitals, training local employees, use local suppliers etc.foreign MNCs do not engage in disloyal transfer pricingforeign investor makes effort to employee and train local staff, use local suppliers and limits environmental damages (contribution to reduction of unemployment, poverty and enterprise creation)

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Global & Regional Trade Agreements(select group of key RTAs)

WTO

NAFTA

CARICOMSUR

CAN

MERCOSUR

EU

FTAAINDIA

CHINA

ASEAN

EFTA

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Trade Strategies for SUR?CARICOM: cost/benefit analysis? Joining forces with regional competitors (tourism, minerals, agro) aiming at same markets (USA, EU) ?FTAA: options after Cancun failure: “light” (Brasil), “flexible” (USA), “a la carte” (FTA or “sauve qui peut”) ?MERCOSUR: Association Agreement like Bolivia?China, India, South Africa viable export markets for SUR products and services?

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Things to do. For Suriname..Ensure effective interministerial coordination mechanismEnsure effective government to business consultation mechanismsEnsure that political parties and civil societies understand cost/benefit of doing nothing versus doing what (re:competitiveness?Establish sectoral strategies first, then decide on trade regime and trade negotiation strategiesEnsure adequate training of economic and trade diplomats and civil servants

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Things to do...Ensure adequate data collection and public access to pertinent trade and economic informationEnsure effective representation of SUR interests at WTO, FTAA, CARICOM, MERCOSUR, and EU as well as constructive cooperation with UNCTAD, UNDP, IDB, WB, IMF, WHO, ILO and UN.Study examples of other countries with similar multi-ethnic composition like Singapore, Switzerland, Mauritius, and Bolivia to learn from their successes and failures.

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Thank You for your attention !!