Enhancing Export Competitiveness in GCC and Yemen Lessons from - - PowerPoint PPT Presentation

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Parth S. Tewari Head, Competitive Industries Practice The World Bank Group, Singapore 14th GCC Industrialist Conference, Muscat, March 31st, 2014

Enhancing Export Competitiveness in GCC and Yemen Lessons from Singapore and other international experiences

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Today’s discussion

• The broad context of the region
• Some principles for enhancing export competitiveness
• Specific learnings from Singapore and other countries

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Today’s discussion

• The broad context of the region
• Some principles for enhancing export competitiveness
• Specific learnings from Singapore and other countries

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One of the key issues in the region is to create large number of jobs for citizens, especially the youth

Large number of potential new entrants to the job market Sustainable and quality private sector jobs key issue “Private companies in GCC expected to generate 600,000 local jobs by 2018,

• ne million less than the number of

nationals likely to come into the labor market” - IMF “Most countries know now that the model of simply employing nationals in the GCC in the public sector is not a sustainable model, because the public sector is running out of jobs to provide, because it’s not improving productivity,”

Source: IMF

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The jobs challenge comes with a backdrop of a historically volatile

• il price environment

Source: BP

World Oil Prices

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Private sector led non-oil export development has struggled in the past two decades but has potential

GCC hydrocarbon dependency in revenue and export (1990-2009)

Source: IMF

UAE stands out

• Oil and gas concentration increase has been due to price rise
• In real terms, non-oil GDP has grown at a faster clip than oil GDP
• Main drivers of non-oil GDP are non-tradable services - construction, retail, financial

services, transport

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Outside-in perspective on the key need areas in GCC and Yemen

• 1. To create large number of jobs
• 2. To increase economic diversification
• 3. To capture more value in the economies
• 4. To enhance export competitiveness

Focus of today’s discussion

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There are some major barriers to export competitiveness in the region

• 1. Labor market constraints
• Skills shortage and mismatch
• Culture and incentives heavily skewed in favor of public sector jobs
• Increasingly restrictive labor policies (From private sector point of view)
• Minimum wage for citizens
• Citizen quota
• Permits for expats
• 2. Coordination and implementation issues
• 3. Lack of focus on tradable goods and services
• Non-oil GDP dominated by non-tradable services (financial services,

construction, transport, retail)

• 4. Limited innovation
• 5. Business environment and infrastructure generally good with some

areas of improvement

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Today’s discussion

• The broad context of GCC and Yemen
• Some principles for enhancing export competitiveness
• Specific learnings from Singapore and other countries

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Enhancing export competitiveness requires a holistic approach that needs to be implemented in a coordinated and an on-going manner with checks and balances

Dynamic Industry Development Foreign Expertise and Investments Active Trade Facilitation

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Enhancing export competitiveness requires a holistic approach that needs to be implemented in a coordinated and an on-going manner with checks and balances

• Identify growth industries
• Groom for global value chain

competitiveness 1.Policies and regulation 2.Skills 3.Infrastructure 4.Access to Finance 5.Technology

• Institutions (clusters, coordination

mechanism, M&E)

• Organize interventions
• Supplier development programs
• SEZs
• Strategic FDI – focus on both

capital and expertise

• Ease of Doing Business
• Tariff Barriers
• Non-Tariff Barriers
• Trade Infrastructure
• Regulation
• Free-trade agreements
• Regional trade strategies

Dynamic Industry Development Foreign Expertise and Investments Active Trade Facilitation

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Singapore has achieved significant results in non resource based export development

Land Energy Basic materials Population GDP Trade 0.05 ~0 7.6 38 220 Singapore’s share of World Basis points

Source: World Bank; USGS; UN COMTRADE

Unemployment rate of <2%

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The country has covered a lot of distance in the last five decades

• No natural resource endowment
• Minimal industrial base (mainly in non-

durable consumer goods)

• Withdrawal of British military base
• Low education base
• High unemployment (~9%)
• Small domestic market and loss of a

common market, i.e. Malaysia

• Over-dependent on entrepot trade and

servicing British navy base

• #1 Ease of Doing Business
• #1 Gallup Net Migration Index
• #1 skilled labor in Asia-pacific
• #2 WSJ Index of Economic Freedom
• #2 in best investment potential (BERI)
• #3 WEF Global Competitiveness Index
• #11 Economist Quality of Life Index
• Asia’s most “Tech-ready” City, PwC

Global IT Report 1960 Today

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1995 2000 2005 2011

Singapore’s export portfolio is diversified and dynamic

Chemical/bio products Textiles

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Today’s discussion

• The broad context of GCC and Yemen
• Some principles for enhancing export competitiveness
• Specific learnings from Singapore and other countries

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Strategy Key issues relevant to GCC Some examples and lessons from Singapore and other countries Dynamic Industry Development

• Continually

identify growth industries

• Skills

development

• Institutions
• Coordination
• M&E
• Innovative

initiatives

• Singapore has dynamically targeted key sectors for growth and

exports over time with a market sensing approach

• Skills development has been in-sync with market development (Bio-

polis example)

• Malaysia achieves strong coordination and M&E across institutions

through PEMANDU; Singapore has built a strong institution to develop trade (IE Singapore)

• Various countries have developed supplier development programs to

promote exports from SMEs that are supplier to large anchor firms (Chile) Foreign Expertise and Investments Strategic FDI (both capital and expertise)

• Industrial FDI and exports success in Jurong Island, Singapore
• Knowledge FDI exports and success in Biopolis, Singapore

Active Trade Facilitation

• Free trade

agreements

• Regional trade

strategies

• Regional competitiveness strategies: Singapore-Malaysia-Indonesia

Regional Special Economic Zone

• Successful in executing and leveraging FTAs (Singapore)

Some examples from Singapore and other countries on the holistic approach to enhance export competitiveness

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Singapore has dynamically prioritized key sectors over time

1960

5000 10000 15000 20000 25000 30000 35000 40000 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 GDP/Capita (US$) 2000s: Innovation Intensive 90s: Technology Intensive 80s: Capital Intensive 70s: Skills Intensive 60s: Labour Intensive

GDP per capita  80x in 50 years

What are the sectors GCC countries and Yemen have identified as priority for investments and exports?

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Import Substitution Export Orientation and Labor-intensive Manufacturing Capital-intensive Manufacturing Innovative Competitiveness

Enhancing competitiveness is an on-going process and takes time

1965 - 1985 1986 - 1997 1997 - 2010

Regulatory Environment Infrastructure Skills & Capabilities Financing Innovation & technology

• Import tariffs, quotas

to protect infant manufacturing

• Jurong Industrial

Estate begins development

• EDB established in ’61
• Survival-driven phase
• Basic education

expands quickly

• S$100 million start up

grant for EDB

• Loans to companies

from revenue surpluses

• Generic standard

factories

• Twin engines approach of

manufacturing and services

• Nationalized where private

sector lacked expertise (GLCs)

• URA’s 1971 concept plan

provided industrial estates just

• utside central ring
• Plug-and-play industrial

environment

• Technical Education

Department set up at the Ministry of Education

• Skills training centers with Tata,

Rollei and Phillips

• FDI in manufacturing through

Economic Expansion Incentives Act

• Services growth through

headquarter tax incentives

• Singapore Sciences Park 1 built
• National Computer Board formed
• Cluster development strategy

adopted

• Business friendly investment

climate

• S$1 billion CDF launched to

catalyze high growth clusters

• Seven offshore islands

reclaimed into Jurong Island

• ITE established for high quality

technical and vocational education.

• Local industry upgrading

program

• Close coordination between

industry and tech institutes for technology sharing

• Focus on higher value-added

industries (e.g. biomedical sciences)

• URA instituted “impact-based”

zoning

• Industry-specific infrastructure

prioritized

1960 - 1964

• Programs to nurture local

science and R&D talent, and attract foreign high skilled labor introduced

• EDBi, investment arm of

EDB, sets up department for biomedical sciences

• Biopolis set up
• Major resource commitment

made to science and R&D in schools and colleges

• 2 technology corridors

marked for development

What are the sectors GCC countries and Yemen have identified as priority for investments and exports?

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Various agencies - from FDI attraction to export promotion - work in a cohesive manner

ROLE

▪

Key government agency in charge of attracting FDI and creation of favourable business environment

▪

EDBI is Investment arm investing in new industries

▪

Government agency

▪

One-stop-shop for foreign investors

▪

500 employees of which ~ 100 in one of 19 international

• ffices

STATUS

▪

Government

▪

2008 Expenditure: USD 400m

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Promotion of exports of Singapore-based enterprises

▪

Financing options and capability building focus (skill- building)

▪

Government agency

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One-stop-shop for firms seeking to export

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~500 employees of which ~50 in 30 offices abroad

▪

Government

▪

2008 Expenditure: USD 117m

▪

Payment by companies for selected customised services

▪

Agency supporting SMEs and start-ups with overall mission to “Enable Enterprises” and create a competitive SME sector through financing

▪

Skill building

▪

Government agency

▪

~370 employees

▪

Government

▪

2008 Expenditure: USD 96m

▪

Payment by companies for selected customised services

▪

Agency for Science, Technology and Research in charge of promotion of research and innovation

▪

Focus on life science and engineering/IT

▪

Government agency

▪

~ 150 employees

▪

Government

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2008 Expenditure: USD 710m

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Payment by companies for selected customised services FUNDING

SOURCE: EDB, MTI, Spring, A*Star, Global best practice in productivity improvement – lessons for Northern Ireland, IREP

19

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Malaysia achieves strong coordination and M&E across agencies through PEMANDU

How do GCC countries achieve strong coordination across agencies and M&E?

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Malaysia drives accountability through KPIs across agencies

Malaysia example

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Innovative SMEs that export can be developed through smart supplier development programs

Chile BHP Billiton – world class supplier program Clusterland Upper Austria – innovation through cooperation

• Vision: Convert 250 of the 3000+ local

suppliers to BHP Copper mining cluster into world class suppliers (>30% sales from exports)

• How: Project-based development strategy
• Project problem floated by mining co
• Suppliers need to innovate to solve
• Suppliers supported by mining co,

universities, government

• Suppliers supported in scaling up and

exporting successful solutions Examples: Prodinsa (local supplier) improved shovel cable life by 40%; Biohydro automated wetting phase in Copper leaching process

• Goal: Promote innovation in Upper Austria

province in 6 clusters (e.g., auto, plastic etc.) and 3 cross-cutting themes (HR, design, energy efficiency)

• How: Collaborative Projects
• Institution co-owned by government and

chamber of commerce and federation of Austrian industry

• 76% self-financed through annual fees from

companies

• Main goal is to catalyze multi-company

innovation projects, which eventually are submitted as proposal for bigger funding

• Impact:
• 323 projects, 1375 partners
• E.g., microchip prototype for dental braces to

monitor temperature;

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Smart design has made Jurong Island Asia’s #1 oil hub

Jurong Island: benchmark petrochemicals cluster

• Single island formed from 7 small islands
• 3000 hectares costs $7 bn in reclamation costs
• Hosts 96 global petroleum, petrochemicals and

specialty chemicals companies, such as BASF, Exxonmobil, Dupont, Mitsui Chemicals, Chevron Texaco, Shell and Sumitomo Chemical.

• Drawn investments of US$42 billion and

employs about 8,000 people as of 2013.

Singapore Is:

• Asia’s Leading oil hub (3rd

largest trading hub globally) despite not having a single drop

• f crude
• Top 5 export refining hub at a

single location

• Top 10 global chemicals hub
• Manufacturing output: S$16 bn

(2010)

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One North Cluster: $234m home of Singapore's biotech industry – smart planning for colocation advantages

Co-location offers unprecedented opportunities to integrate scientific capabilities, foster close linkages, inter-disciplinary research, and international links through research and graduate training partnerships. Phase 1: Two buildings dedicated to private sector biomedical players. Five more buildings house seven biomedical research institutes that are under A*Star. Phase 2: Two more buildings house public research units, corporate R&D labs. Phase 3: Multi-tenanted research facility bridges private and public sector research work

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Singapore’s FDI and export success in Biomedical sciences: BioPolis

• Biomedical sciences’ manufacturing output

has increased five-fold from $6 bn in 2000 to $29.4 bn in 2012

• $15.3 bn in value added, 25% of all

manufacturing value added in 2012

• 15,700 scientists and engineers employed in

BMS industry

• Inflow of FDI: GlaxoSmithKline, Pfizer,

Merck, Aventis, Eli Lilly, Wyeth, Roche, Schering-Plough and Novartis Market sensing approach to sector prioritization

• Growing market for research in diseases

prevalent in Asian ethnic groups

• Exploitable gap, since US clamp down on stem

cell research

• Culture of celebrating science learning in

Singapore, existing pharmaceutical manufacturing

1000000 2000000 3000000 4000000 5000000 6000000 Thousand US$

Exports

[541] Medicinal and pharmaceutical products, excluding 542 [542] Medicaments (incl. veterinary medicaments)

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Sub-regional economic zone – Singapore; Johor, Malaysia; Riau, Indonesia - leverages complementarities

Source: Hieu, 2009; http://etheses.whiterose.ac.uk/1251/6/mc_ch4-done.pdf

Est. 1989

Context: Singapore’s wages were increasing, but productivity increases not as high. Singapore needed partners to house labor-intensive activities.

What are the areas of regional cooperation between GCC countries for export and FDI opportunities?

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Symbiosis: All three have benefited

Pasir Gudang is Johor’s largest and most successful industrial estate and free-trade zone Batam Industrial Park (Batamindo) houses light manufacturing activities of Singapore. Singapore has overcome constraints in land/labor, and restructured towards higher value- added goods, and more capital- and technology- intensive manufacturing and service activities

Source: DFAT, 29-49

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Singapore has one of the most extensive FTA network in the world

ASEAN Free Trade Area (AFTA) ASEAN-Australia-New Zealand FTA (AANZFTA) ASEAN-China (ACFTA) ASEAN-India (AIFTA) ASEAN-Japan (AJCEP) ASEAN-Korea (AKFTA) Australia (SAFTA) China (CSFTA) Costa Rica (SCRFTA) GCC (GSFTA) General Hashemite Kingdom of Jordan (SJFTA) India (CECA) Japan (JSEPA) Korea (KSFTA) New Zealand (ANZSCEP) Panama (PSFTA) Peru (PeSFTA) Switzerland, Liechtenstein, Norway and Iceland (ESFTA) Trans-Pacific SEP (Brunei, New Zealand, Chile, Singapore) United States (USSFTA) FTAs in-force FTAs under discussion ASEAN-India Services & Investment ASEAN-Japan Services & Investment Canada Mexico Pakistan TPP Ukraine

• A Free Trade Agreement (FTA) is a legally binding agreement between 2 or more countries

to reduce or eliminate barriers to trade, and facilitate the cross border movement of, goods and services between the territories of the Parties

• FTA’s are WTO consistent

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Key learnings for GCC and Yemen from Enhancing Export Competitiveness in Singapore

1. Integrated approach: Enhancing export competitiveness requires a holistic approach that needs to be implemented in a coordinated and an on-going manner with checks and balances – dynamic industry development, Investments/FDI and trade facilitation 2. All hands on deck: Strong government co-ordination and accountability (M&E) through anchor institution such as PEMANDU 3. Organize priorities through clusters or zones when possible such as Jurong or Biopolis that is based on smart design, public-private trust and partnership, coordination and accountability 4. Involve anchor companies for SME innovation and export 5. Synchronize education and skills supply to needs of the priority sector 6. Leverage FTAs and regional multi-country efforts

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Shukran

Parth S. Tewari ptewari@worldbank.org Head, Competitive Industries Practice The World Bank Group, Singapore