Download Creating a Competitive Nigeria: Towards a Shared Economic Vision

Creating a Competitive Nigeria:
Towards a Shared Economic Vision
Professor Michael E. Porter
Harvard Business School
Presentation to Federal Ministers
Lagos, Nigeria
July 23, 2009
This presentation draws on ideas from Professor Porter’s books and articles, in particular, Competitive Strategy (The Free Press, 1980); Competitive
Advantage (The Free Press, 1985); “What is Strategy?” (Harvard Business Review, Nov/Dec 1996); “Strategy and the Internet” (Harvard Business
Review, March 2001); and a forthcoming book. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or
by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Michael E. Porter. Additional information may
be found at the website of the Institute for Strategy and Competitiveness, www.isc.hbs.edu. Version: July 17, 6pm
20090408 – CAON Nigeria.ppt
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Copyright 2009 © Professor Michael E. Porter
What is Competitiveness?
• Competitiveness depends on the productivity with which a nation uses
its human, capital, and natural resources.
– Productivity sets the sustainable standard of living (wages, returns on
capital, returns on natural resources)
– It is not what industries a nation competes in that drives prosperity, but how
it competes
– Productivity in a national economy depends on a combination of domestic
and foreign firms
– “Local” or domestic industries are fundamental to competitiveness, not
just export industries
• Nations compete to offer the most productive environment for business
• The public and private sectors play different but interrelated roles in
creating a productive economy
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Copyright 2009 © Professor Michael E. Porter
Labor Productivity
Selected Countries
Real GDP per employee
(PPP adjusted US$), 2008
$90,000
USA
Ireland
$80,000
France
UK
$70,000
Australia
Saudi Arabia
Germany
Japan
Italy
Spain
Oman
$60,000
Slovenia
$50,000
Korea
New Zealand
Slovakia
Czech Republic
$40,000
Croatia
Poland
Mexico
Chile
$30,000
Turkey
Malaysia
Russia
Argentina
Romania
Iran
Peru
$20,000
Brazil
Algeria
Syria
$10,000
Cote d’Ivoire
-1%
1%
Kazakhstan
Egypt
China (10.1%)
Indonesia
Angola
(14.0%)
India Sudan
Nigeria
Bangladesh
Cambodia
Vietnam
Kenya
Uganda
Ethiopia
Mozambique
Ghana Zambia
Senegal
0%
Tunisia
Thailand
Morocco
Pakistan
Cameroon
Zimbabwe (-8.9%)
$0
-2%
South Africa
2%
Philippines
3%
4%
5%
6%
7%
8%
Growth of real GDP per employee (PPP-adjusted), 2004 to 2008
Source: authors calculation Groningen Growth and Development Centre (2009), EIU (2009)
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Copyright 2009 © Professor Michael E. Porter
Determinants of Competitiveness
Microeconomic Competitiveness
Quality of the
National
Business
Environment
State of Cluster
Development
Sophistication
of Company
Operations and
Strategy
Macroeconomic Competitiveness
Social
Infrastructure
and Political
Institutions
Macroeconomic
Policies
Natural Endowments
• Productivity ultimately depends on improving the microeconomic capability of
the economy and the sophistication of local competition
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Copyright 2009 © Professor Michael E. Porter
Sources of Prosperity
Inherited Prosperity
Created Prosperity
• Prosperity is derived from inherited
natural resources
• Prosperity results from productivity in
producing goods and services
– Prosperity is limited
– Prosperity is unlimited
• Dividing the pie
• Expanding the pie
• Government is the central actor in the
economy
• Companies are the central actors in the
economy
• Resource revenues fuel corruption and
allow unproductive policies and
practices to persist
• Government’s role is to create the
enabling conditions for productivity and
foster private sector development
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Copyright 2009 © Professor Michael E. Porter
Nigerian Macroeconomic Competitiveness
Macroeconomic Policy
Macroeconomic Policy
• Nigeria has made significant progress on macroeconomic policy
• These gains must be sustained against short-term temptations
• Tax complexity remains a weakness
Political Institutions
• Political institutions remain weak
• The data shows some progress on reducing corruption and rule of
law but Nigeria remains among the worst affected countries globally
• Nigeria remains in the bottom group of sub-Saharan countries in terms
of governance
• Government entities are often inefficient and uncoordinated
• The States and the Federal government suffer from rivalry and poor
collaboration
Social Infrastructure
• Education and health care remain major weaknesses
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Copyright 2009 © Professor Michael E. Porter
Nigerian Microeconomic Competitiveness
Business Environment
Strengths
Weaknesses
• Home market
• Favorable location
• Abundant resources and
agricultural potential
20090408 – CAON Nigeria.ppt
•
•
•
•
•
•
•
•
•
•
Electricity
Land transport
Air transport
Land use
Workforce skills
Access to finance
ICT capacity
Business regulation / red tape
Tariff and non-tariff barriers
Monopoly / lack of open
competition
• IP protection
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Copyright 2009 © Professor Michael E. Porter
Nigerian Microeconomic Competitiveness
Selected Rankings from the Global Competitiveness Report
Rank versus 134 Countries
Patents per million population
Quality of electricity supply
Ease of access to loans
Burden of customs procedures
Regulatory quality
Quality of railroad infrastructure
Personal computers per 100 population
Quality of port infrastructure
Domestic credit to private sector
Mobile telephone subscribers per 100 population
Internet access in schools
Quality of roads
Tertiary enrollment
Low tariff rate
Internet users per 100 population
Intellectual property protection
Pay and productivity
Ease of starting a new business
134
133
124
122
122
121
117
115
114
111
105
104
103
100
99
96
93
93
Note:
Rank versus 134 countries; overall, Nigeria ranks 106th in 2008 PPP adjusted GDP per capita and 93rd in Global Competitiveness
Source: Institute for Strategy and Competitiveness, Harvard University (2009)
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Copyright 2009 © Professor Michael E. Porter
Microeconomic Competitiveness
Ranking, 2008
(of 181 countries)
Ease of Doing Business
Favorable
Unfavorable
180
160
140
120
Nigeria per capita GDP rank: 117
100
80
60
40
20
0
Ease of Employing Protecting
Doing
Workers
Investors
Business
Getting
Credit
Enforcing
Contracts
Starting a
Business
Paying
Taxes
Trading
Across
Borders
Dealing Registering
with
Property
Licenses
Median Ranking,
Sub Saharan Africa
Source: World Bank Report, Doing Business (2009)
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Closing a
Business
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Copyright 2009 © Professor Michael E. Porter
Competitiveness and Cluster Development
Tourism Cluster in Cairns, Australia
Public Relations &
Market Research
Services
Travel agents
Tour operators
Restaurants
Attractions and
Activities
Food
Suppliers
Local
Transportation
e.g., theme parks,
casinos, sports
Property
Services
Maintenance
Services
Local retail,
health care, and
other services
Souvenirs,
Duty Free
Airlines,
Cruise Ships
Hotels
Banks,
Foreign
Exchange
Government agencies
Educational Institutions
Industry Groups
e.g. Australian Tourism Commission,
Great Barrier Reef Authority
e.g. James Cook University,
Cairns College of TAFE
e.g. Queensland Tourism
Industry Council
Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden
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Copyright 2009 © Professor Michael E. Porter
Cluster in Developing Countries
Kenya’s Cut Flower Cluster
Government Agencies, NGOs & Industry Associations
Horticultural Crops Development Authority (HCDA)
Government Export Policies targeting Horticulture
Government Policy for Revitalizing Agriculture; National Export Strategy; Export
Promotion Council (EPC)
Non-Governmental Organizations
The Rural Enterprise Agri-Business Promotion Project (USAID, CARE, IFAD)
Horticultural Produce Handling Facilities Project (JBIC)
Plantstock
Greenhouse;
Shading
Structures
Trade & Industry Associations
Kenya Flower Council (KFC)
Fresh Produce Exporters Association of Kenya (FPEAK)
Regional Growers Associations e.g., North & South Kinangop; Lake Naivasha, etc
Irrigation
technology
Pre-Cooling
Technology
Fertilizers,
pesticides,
herbicides
Agricultural
Cluster
Horticultural
Cluster
Post-Harvest
Handling;
Transport to
Market
Flower
Farming
Post-Harvest
Cooling
Technology
Grading /
Packaging Sheds
Packaging &
Labeling
Materials
Refrigerated
Trucks
Freight
Forwarders
Education, Research & Quality Standards Organizations
Research Institutions:
Kenya Agricultural Research Institute (KARI)
International Center for Insect Physiology and Ecology (ICIPE)
Public universities with post graduate degrees in
horticulture:
University of Nairobi; Jomo Kenyatta University of Agriculture & Technology
Clearing and
Forwarding
Agents
Air Carriers
(Commercial /
Charters)
(Fruits & Vegetables)
Quality & Standards:
EUREGAP Standard (UK & Dutch Supermarkets)
Kenya Plant Health Inspectorate Services (KEPHIS)
Tourism
Cluster
Sources: Student team research by Kusi Hornberger, Nick Ndiritu, Lalo Ponce-Brito, Melesse Tashu, and Tijan Watt,
Microeconomics of Competitiveness Course, 2007
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Copyright 2009 © Professor Michael E. Porter
Nigeria’s Cluster Export Portfolio
1997 to 2007
0.6%
Change In Nigeria’s Overall Growth
In World Export Share: -0.162%
Business Services
Leather and Related Products
Nigeria’s world export market share, 2007
0.5%
Oil and Gas (-0.22%, 2.73%), $50.5 billion
0.4%
Nigeria’s Average World
Export Share: 0.353%
Publishing and Printing
0.3%
0.2%
Marine Equipment
Agricultural Products
Transportation and Logistics
Tobacco
0.1%
Fishing and Fishing Products
Footwear
Plastics
Forest Products
Processed Foods
0.0%
-0.6%
-0.4%
-0.2%
Building Fixtures and Equipment
Textiles
Metal Mining and Manufacturing
Chemical Products
0.0%
0.2%
0.4%
Change in Nigeria’s world export market share, 1997 to 2007
0.6%
0.8%
Exports of US$500 million =
• Nigeria has not yet embraced cluster development at the federal or state level
12 Trade Statistics Database and IMF BOP statistics.
20090408Institute
– CAON Nigeria.ppt
Source:
for Strategy and Competitiveness; Richard Bryden, Project Director. UN Commodity
Copyright 2009 © Professor Michael E. Porter
Competitiveness of Nigerian States
• Many of the essential levers of competitiveness reside at the state level
• Competitiveness requires effective policy collaboration between states and the national
government
• Every state (and city) needs its own distinctive competitiveness plan
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Copyright 2009 © Professor Michael E. Porter
Economic Integration With Neighbors
West Africa
• Economic integration in ECWAS remains limited
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• Nigeria would be the greatest
beneficiary
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Copyright 2009 © Professor Michael E. Porter
Nigerian Competitiveness Agenda
Macro
Business
Environment
Cluster
Development
•
Maintain sound macroeconomic policy
•
Improve the tax system
•
Implement truly effective anti-corruption policies and strengthen the rule of law
•
Modernize government
•
Improve education and health care
•
Address bottlenecks in physical infrastructure and land use
•
Catch up in ICT
•
Modernize and simplify business rules and regulations
•
Continue reform of the financial sector
•
Open up local and international competition
•
Protect intellectual property (IP)
•
Develop a concrete economic diversification strategy based on cluster
development
•
Align the interests of the states and the national government around
competitiveness
•
Create effective economic strategies at the state level
•
Assume a leadership role in West African economic integration
States
Regional
Integration
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Copyright 2009 © Professor Michael E. Porter
Clusters and Economic Diversification
Develop Related Clusters
Deepen Existing Clusters
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Turn Niche Products Into
Clusters
16
Build Clusters Around
Strong MNCs
Copyright 2009 © Professor Michael E. Porter
Recent Nigerian Economic Plans
• National Economic Empowerment
Development Strategy (NEEDS)
• President Yar’Adua’s priorities
–
–
–
–
–
–
–
Electricity
Agriculture
Transport system
Jobs
Land
Education
Security
–
–
–
–
–
Public sector reforms
Privatization and liberalization
Governance
Transparency and anticorruption
Service delivery by government
agencies
• Nigeria 2020
–
–
–
–
–
–
–
Stable democracy
Globally competitive economy
Good infrastructure
Sound education system
Quality health care
Modern agricultural sector
Competitive manufacturing
• Economic reform has been a central focus of recent Nigerian governments
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Copyright 2009 © Professor Michael E. Porter
Defining a Nigerian Economic Strategy
National Economic Strategy
•
•
•
•
What is the unique competitive position of the nation given its
location, legacy, endowments, and potential strengths?
What is the national value proposition?
In what clusters can the nation excel?
What role can the nation play in its region?
Developing Unique Strengths
Addressing Crucial Constraints
• What are the key strengths that the
nation must build upon?
• What weaknesses must be addressed to
achieve parity with peer countries?
•
Nigeria needs an overall strategic framework, not just lists of aspirations and weaknesses
•
The strategy requires more rigorous prioritization and sequencing
•
Competitiveness improvement demands a coordinating structure within government and
a disciplined process of monitoring implementation
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Copyright 2009 © Professor Michael E. Porter
The Process of Economic Development
New Roles and Responsibilities
Old Model
New Model
• Government drives economic
development through policy
decisions and incentives
• Economic development is a
collaborative process involving
the private sector, government at
multiple levels, universities, labor,
and civil society
• Competitiveness needs to become a bottoms-up process
• A shared economic vision across all stakeholders in society is needed
• A national campaign to communicate competitiveness principles and
challenges to the broader population is a necessity, not just to the elites
• The private sector must take responsibility for driving competitiveness
improvement and ensuring continuity
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Copyright 2009 © Professor Michael E. Porter