OECD Private Sector Development 1
Impact of the crisis on regional economies and economic co-operation initiatives in the
Black Sea and Caspian
Thessaloniki, November 2009
OECD EURASIA COMPETITIVENESS PROGRAMME
INITIATIVE FOR THE SOUTH CAUCASUS AND UKRAINE
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1. The competitiveness challenge
2. Potential policy priorities to enhance competitiveness
3. The need for a focused and demand driven regional approach
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GDP growth in the region is impacted by the financial crisisAverage GDP growth falling in 2009
Source: OECD Development Centre / IMF Source: EBRD; e. estimate; p. projection
OECD Private Sector Development 4Source: OECD Development Centre / IMF
Reliance on external financing is increasingOn average 13% of GDP for BSEC region
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How to improve both quantity and quality of FDI?
A measure of competitiveness: FDI growth is slowing downHow to support the quality and quantity of FDI?
Central Europe:
First Wave of FDI
SEE: Second wave of FDI
SCU:Third wave?
Source: EBRD Transition report 2008, OECD Analysis
Impact of the
financial crisis
estimate projection
FDI in USD million
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The region remains cost competitiveExample: Cost competitiveness in labour for the Republic of Moldova
Source: International Labour Organization; zdnetasia; Wall Street Journal, OECD interviews
Leveraging their competitive labour costs in servicesRelative comparison of average monthly labor cost in services (2005)
HungaryHungary PolandPoland CroatiaCroatia Bosnia&H
Bosnia&H
MontenegroMontenegroSerbiaSerbia R.MoldovaR.Moldova IndiaIndia
Index(100:
Hungary)
Index(100:
Hungary)
(1)(1)
Sample of CEE countries WB countries covered by the project Other references
FYR Macedonia
FYR Macedonia
AlbaniaAlbania UNMIKUNMIK
Note: Monthly wages have been calculated on 2003-05 or 2003-06 average; using the LABORSTA Labour Statistics Database and covering, unless specified only the category J (financial intermediation) and K (business activities, real estate and renting). For Albania overall figures are based on category I (transport, storage and communications) due to the absence of statistics on J/K in the ILO databases(1) average monthly wages in all services
Up to 7 timeslower
Example of SEE
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Cost competitiveness is a short term advantageThe need to move up the value-chain
Cost competitiveness is not sustainable
• Markets like India and China are clear low-cost alternatives.
• Cost levels in some sectors are increasing by up to 15% annually, impacting negatively on margins and potentially eroding market share levels.
• Limited access to finance and strategies to reinvest capital in technology and human capital is a risk.
Significant gaps in human capital limit the opportunities to move up the value chain
• Skills gaps in high growth industries such as ICT reach 60%.• Coordination between ministries of education and economy and dialogue with civil society are limited.
Limited focus on sector specific policy barriers as well value-added services
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Policy priorities to enhance competitivenessBased on feedback from countries of the region
SustainedCompetitiveness
How to tailor human capital policies and practices to support financial and business services?
How to support FDI by removing policy barriers and supporting specific sectors?
How to address the impact of the financial crisis, especially in terms of access to finance?
Which key areas need to be address to enhance investment and competitiveness in the Black Sea (SCU)?
The need to focus on SME competitiveness
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Improving NationalCompetitiveness
Enhancing RegionalBusiness Climate
Prioritisation of policies to improve the business climatePolicy Working Groups Policy guideline and targeted implementation
OECD Sector Competitiveness StrategySurveys of investors and private sector perceptionEvaluation of policy reformsSupporting in implementing reforms
OECD Eurasia Competitiveness ProgrammeNew OECD Mandate (2008) covering two regions and 11 countries
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Example : Monitoring policies at the regional levelAddressing reforms through regional working groups and peer review
The OECD Investment Reform IndexThe SME Charter
Chaired by a country of the region and OECD country
Strong involvement of regional policy makers, private sector and OECD experts
Focused on delivering a “How To” guideline on implementation of reforms
in the targeted policy area
Regional Policy Working Group
Example for South
East Europe
1
2
3
4
5
InvestmentPolicy
InvestmentPromotion
Tax Policy Anti-Corruption
Policy
Trade Policy RegulatoryReform
HumanCapital
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OECD Policies for Competitiveness Assessment Framework
“Policies for Competitiveness” Dimensions
Which key topics should be addressed within each Policy Working Group?
1. Investment Climate Policy and Promotion
2. Financial Markets Development
3. Human Capital for financial and business services
4. Others
Level 1 Level 2 Level 3 Level 4 Level 5
Source: OECD PfC Assessment Framework
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Example: Investment climate policy and promotion
FDI Policy Promotion and Facilitation
Transparency
Framework• Strategy• Institutional support• Monitoring and evaluation• National and sub-national
coordination
Investment promotion services and activities
• FDI-SME linkages• One stop shop• Client relationship
management• Policy advocacy• Aftercare services• Free Economic Zones
• Publication avenues and tools
• Prior notification and stakeholder consultations
• Procedural transparency
Non-discrimination• Restrictions to national
treatment• Review of restrictions to
national treatment• Approval procedures• Admittance of business
personnel• Transfers of FDI related capital• FDI incentives• Performance requirements
Property rights• Land ownership• Titling and cadastre• Intellectual property
Investor protection• Expropriation guarantees• International agreements• Arbitration
Initial area of focusInitial area of focus
Source: OECD PfC Assessment Framework
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The need to focus on Investment Promotion and FacilitationOverall high level of reform
Source: OECD Survey
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Good FDI performance and average FDI potential
Source: UNCTAD 2004-07, Ranking of 141 countries, OECD Analysis
FDI Performance and Potential
Improvement of FDI attractiveness through policy reform
High FDI PerformanceLow FDI Performance
High FDI Potential
Low FDI Potential
FDI Inflows < 0 FDI/GDP ratio = 1(world shares)
Median of 141 countries
ArmeniaTurkey
Georgia
Azerbaijan
Hong Kong,China
Czech Republic
FDI Potential is measured through a wide set of indicators such as:
•GDP per capita and growth•Share of global exports•Share of R&D spending•Country risk•Share of world FDI stock
FDI Performance is measured through the ratio of a country‘sshare in global FDI inflowsto its share in global GDP.
Below potential Front-runners
Under-performers Above potential
Jordan
Luxembourg Norway UAE
Egypt
Kazakhstan
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Example: Developing and implementing country / sector specific competitiveness strategies
Example for
Republic of Moldova
Sector specific approaches help focus reform efforts
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Engaging the region and listening to country priorities
The initiative was formally launched at a Ministerial Conference held on 1 April 2009 at the OECD
Ministers and high-level representatives of all countries of the region (Armenia, Azerbaijan, Georgia, Republic of Moldova and Ukraine) adopted a statement to enhance competitiveness in the region
The conference was chaired by Poland and Sweden in collaboration with Czech EU Presidency and the EC
Strong collaboration with the private sector
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Contact details
ORGANISATION FOR ECONOMIC COOPERATION AND DEVELOPMENTDirectorate for Financial and Enterprise AffairsPrivate Sector Development Division
Fadi FarraHead Eurasia Competitiveness ProgrammeTel: + 33 1 45247820Fax : + 33 1 45249335Mobile: + 33 6 19133282e-mail: [email protected]
Daniel QuadbeckPolicy Analyst Eurasia Competitiveness ProgrammeTel: + 33 1 45247522Fax : + 33 1 45249335
e-mail: [email protected]
