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OECD EURASIA COMPETITIVENESS PROGRAMME
INITIATIVE FOR THE SOUTH CAUCASUS AND UKRAINE
The Black Sea Region: New Challenges and
Opportunities for Regional Cooperation
Berlin, May 2009
OECD Private Sector Development
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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
OECD Private Sector Development
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Is the region competitive?
FDI trends indicate potential interest from investors
FDI in USD
Million
35,000
Central Europe
30,000
25,000
SEE
South Caucasus and Ukraine
SEE: Second
wave of FDI
Central
Europe:
First Wave
of FDI
20,000
BlackSea:
Third
wave?
15,000
10,000
5,000
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Source: EBRD Transition report 2008, OECD Analysis
OECD Private Sector Development
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GDP growth in the region is impacted by the financial crisis
Average GDP growth falling in 2008
Growth in BSEC-CA Countries
GDP growth (per cent)
14
1998 - 2008
12
10
8
6
4
2
0
-2
LOW & LOWER-MIDDLE INCOME BSEC: Albania, Armenia, Azerbaijan,
Georgia, Moldova, Ukraine
UPPER-MIDDLE & HIGH INCOME BSEC: Bulgaria, Greece, Romania,
Russia, Serbia, Turkey
CENTRAL ASIA: Kazakhstan, Kyrgyz Republic, Tajikistan, Turkmenistan,
Uzbekistan
Source: OECD Development Centre / IMF
Source: EBRD; e. estimate; p. projection
OECD Private Sector Development
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Reliance on external financing is increasing
On average 13% of GDP for BSEC region
330
14
280
12
230
10
180
8
130
6
80
4
30
2
-20
0
External Financing / GDP (%)
USD Billion
External Financing - BSEC
External financing/GDP (right-hand axis)
External financing
Capital inflows
FDI Inflows
Workers' remittances and compensation of employees
Source: OECD Development Centre / IMF
OECD Private Sector Development
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FDI growth is slowing down after a period of high growth
South Caucasus and Ukraine:
FDI Net Inflows 1999-2007 (in US$ million)
FDI per capita up to 6 times lower than South East Europe
Source: EBRD Transition report 2008
OECD Private Sector Development
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The region remains cost competitive
Example: Cost competitiveness in labour for the Republic of Moldova
Example of SEE
Leveraging their competitive labour costs in services
Index
(100:
Hungary)
Relative comparison of average monthly labor cost in services (2005)
Up to 7
times
lower
(1)
Hungary Poland
Sample of CEE countries
Croatia Bosnia
Serbia
Albania UNMIK
&H
FYR
Montenegro
Macedonia
WB countries covered by the project
R.Moldova
India
Other references
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
Source: International Labour Organization; zdnetasia; Wall Street Journal, OECD interviews
OECD Private Sector Development
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Cost competitiveness is a short term advantage
The 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
OECD Private Sector Development
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Policy priorities to enhance competitiveness
Based on feedback from countries of the region
Which key areas need to be address to enhance investment
and competitiveness in the Black Sea (SCU)?
Human Capital
How to tailor human capital
policies and practices to support
financial and business services?
Sustained
Competitiveness
Financial
Markets
Development
How to address the impact of
the financial crisis, especially in
terms of access to finance?
Investment
climate policy
and promotion
How to support FDI by removing policy
barriers and supporting specific
sectors?
The need to focus on SME competitiveness
OECD Private Sector Development
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OECD Eurasia Competitiveness Programme
New OECD Mandate (2008) covering two regions and 11 countries
Enhancing Regional
Business Climate
Prioritisation of policies to improve the business
climate
Policy Working Groups
Policy guideline and targeted implementation
Improving National
Competitiveness
OECD Sector Competitiveness Strategy
Surveys of investors and private sector perception
Evaluation of policy reforms
Supporting in implementing reforms
OECD Private Sector Development
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Example : Monitoring policies at the regional level
Addressing reforms through regional working groups and peer review
Example for South
5
The OECD Investment Reform Index
The SME Charter
East Europe
4
3
2
1
Investment
Policy
Investment
Promotion
Tax Policy
AntiCorruption
Policy
Trade Policy
Regulatory
Reform
Human
Capital
Regional Policy Working Group
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
OECD Private Sector Development
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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
OECD Private Sector Development
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Engaging the region and listening to country priorities
The initiative was formally launched at a Ministerial
Conference held on 01 April 2009 at the OECD.
Ministers and high-level representatives of all countries of
the region (Armenia, Azerbaijan, Georgia, Ukraine and
Moldova) 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
OECD Private Sector Development
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