Fairbanks

10 April 2005Competitiveness and Globalization:

Model Building for a World Class Private Sector

2 Copyright © OTF Group, Inc. .2Confidential

Why prosperity matters...

There is a correlation between incomes and:

productive attitudes toward authority ,

tolerance of others and support of civil liberties, openness toward foreigners ,

positive relationships with subordinates, self-esteem ,

sense of personal competence, satisfactions with one’s own life ,

the disposition to participate in community and national affairs,

and interpersonal trust,…

Alex Inkeles, Stanford University


Seven Forms of Capital

Part of the World Bank’s Comprehensive Development Framework

Soc

ial

Phy

sica

l

Cultural

Human

Knowledge

Institutional

Financial

Man-Made

Natural Endowments

• Tangible Articulations• Norms• Mental Models

• Environmental Issues• Raw Materials• Climate and Location

• Transportation, Communication• Power• Water and Sewerage

• Financial Systems• Private Wealth• Public Wealth

• “Good, Clean Governance”• Justice System• Connective Organizations

• Qualitative, Quantitative Data• Frameworks and Concepts• Knowledge Generation

• Health and Population• Education and Training• Attitudes and Motivation

• Architecture, Music, Language• Range of Acceptable Behaviors• Trust, Wealth Creation Attitudes, Long-Term Thinking

• Conservation, Restoration • Agricultural, Mineral, Petroleum• Proximity to Markets

• Roads, Ports, Telephone Systems• Electric Grids, Generation Capacity• Pipelines, Pumping Stations

• Transparency, No Hidden Costs• Property Protection, Predictable Regulations• Chambers of Commerce, Unions

• Statistics, Opinions, Records• Theories, Processes, Procedures• Universities, R&D, Market Learning

• Nutrition, Medical & Mental Health• Primary & Secondary, Technical• Self-responsibility, action-orientation

Representative Elements Representative Examples

• Banks, Stock Markets• Bank Deposits• Bank Reserves, Taxes, Duties, Macroeconomic Stability


Competitiveness Theory

What is Competitiveness?

Competitiveness has emerged as the preeminent issue in every nation – for companies and governments

Upgrading a nation’s export competitiveness requires a shared understanding of competitiveness within the nation

Competitiveness is not simply:– A favorable exchange rate– Positive balance of trade– Industrial subsidies– Low inflation rate

Rather, competitiveness is the productivity with which resources are deployed– Human resources– Capital– Physical assets

Since competitiveness relies on productive deployment of resources, industry sectors and their firms compete, not nations

– Government has a partial but significant role in creating the platform from which firms compete

– Clusters of related and supporting firms are the building blocks of a competitive economy


USAUSA

AdvertisingAdvertisingAircraftAircraft

Construction EquipmentConstruction Equipment

GermanyGermany

Printing PressesPrinting PressesChemicalsChemicals

AutomobilesAutomobilesJapanJapan

RoboticsRoboticsAutomobilesAutomobiles

FacsimileFacsimile

EcuadorEcuador

BananasBananasSouth Africa South Africa

DiamondsDiamonds

ItalyItaly

Ceramic TilesCeramic TilesFootwearFootwear

AppliancesAppliances


Competitive Cluster Examples

• Nations have very different natural resources, macroeconomics and management cultures

• Learning and innovation at the level of the cluster and firm drive competitiveness


Two Paradigms

Thinking in the “Era of Total Competition”

Protected markets Competition and globalization

Macroeconomics Microeconomics

Influence leaders Firm-level Productivity

Natural Capital Human capital and knowledge

Hierarchy Meritocratic

Economies of scale Agility and Focus

Event driven Anticipation and shaping

Government as master strategist Shared vision and collaboration

Redistribution of wealth Wealth creation

Paternalism Innovation

Fatalistic Introspective

Marketplace Marketspace

Comparative Advantage Competitive Advantage

10

Copyright © OTF Group, Inc. .10

ConfidentialNote: 1) Basic products include raw materials and processed products based on natural resources and labor. 2) The coefficent of correlation was .77. Source: IITC - International Trade

Center, CIA World Factbook 1999, OTF Group Analysis. Macedonia 2001 data from OTF Group trade statistics analysis and CIA World Factbook 2002

Countries Unable to Reduce Natural Resource Dependency Have Lower Standards Of Living

Patterns of Anti-competitive Behavior

Relationship Between Natural Resource Exports and Wealth

Percentage of Exports that are Natural Resources

Percentage of Exports that are Basic Products versus Purchasing Power Parity, 1998

PPP per capita

(1998 US$)

U.S.

GERMANY

SWITZERLAND

FRANCEJAPAN

SWEDENU.K.

CANADA

SINGAPORE

KOREA MALAYSIA

BRAZIL

MEXICO

INDIA

PAKISTAN

COLOMBIA

CHILE

COSTA RICA

ARGENTINA

VENEZUELA

BOLIVIA

ECUADORTURKEY

LITHUANIA

RUSSIA

IRELAND

0

5000

10000

15000

20000

25000

0 10 20 30 40 50 60 70 80 90 100

11


Confidential

7%4%

9% 7%

25%

6%3%

9% 8%

26%

7%3%

9% 8%

27%

6%3%

8% 8%

25%

6%3%

9% 10%

28%

5%2%

8% 10%

26%

10%

27%

3% 4% 2% 1%

47%

10%

26%

3% 4% 3% 1%

46%

10%

24%

3% 4% 3% 1%

45%

10%

28%

3% 4% 3% 1%

49%

11%

25%

4% 4% 3%1%

48%

11%

26%

3% 4% 3% 1%

48%

12%

3% 4% 3% 3% 4%

28%

11%

3% 4% 3% 2% 4%

28%

12%

3% 4% 3% 2% 4%

28%

10%

3% 4% 3% 2% 3%

26%

8%3% 4% 4% 2% 3%

24%

9%3% 4% 5% 3% 3%

27%

Upstream IndustriesUpstream IndustriesMaterials / MetalsForest

ProductsPetroleum / Chemicals

Semiconductors / Computers

Food / Beverages Housing / Household Textiles / ApparelHealthCare

PersonalEntertainment /

LeisureFinal Consumption Final Consumption Goods and ServicesGoods and Services

Multiple Business TransportationPower Generationand Distribution

Office Telecommunications DefenseIndustrial and Industrial and

Supporting FunctionsSupporting Functions

Distribution of United States Exports

Trade Statistics by Category

Note: Totals may not add to 100% due to roundingSource: OTF Group; COMTRADE / UN Trade Statistics (Rev. 2)

1992

1994

1996

1998 2000 2002

13


Confidential


Seven Patterns of Uncompetitive Behavior

We have identified seven patterns of behavior that inhibit the development of competitive firms and cluster. By using these patterns as a lens, we can see problems in new ways.

1. Overreliance on Basic Factors

2. Lack of Customer Focus

3. Poor Understanding of Relative Position

4. Lack of Forward Integration

5. Poor Interfirm Cooperation

6. Defensiveness

7. Paternalism

26


Confidential

1. Define and make explicit our moral purpose: a high and rising standard of living for the average Qatari.

2. Acknowledge that we are over-dependent on the basic advantage of natural resources.

3. Understand that wealth in the future is based on insight, sophisticated human capital, cultural attitudes focused on embracing competition, learning, trust, cooperation and investing in complex advantages.

4. Understand that competitiveness is productivity; and productivity is where we choose to compete and how we choose to compete.

5. Acknowledge that the government must do everything it can to assist the private sector, except to impede competition; invest in people, infrastructure, learning organizations and a non-defensive dialogue between the public and the private sectors.

6. Understand that the private sector needs to invest in more learning: customer preferences, knowledge of position relative to competition, possibilities of changing the distribution channels, and investing in the upgrade of its products.

Qatar’s needs

Six Imperatives

This is a vision of knowledge intensive industries, and a Qatar differentiated from regional competitors by specialized innovation. This is a vision of creating new wealth versus

uncovering found wealth.

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