Download Framework for Export Competitiveness

Assessing
Export Competitiveness
Jean-Pierre Chauffour
Economic Advisor, International Trade Department
PREM Learning Week
April 24, 2008
Export Competitiveness (EC)
Session Outline
 9:00-9:30 Introduction to the EC framework
 Jean-Pierre Chauffour (Advisor, PRMTR)
 9:30-10:15 Assessing the incentive system
 Paul Brenton (Senior economist, PRMTR)
 10:15-10:30 Coffee break
 10:30-11:15 Services trade
 Gianni Zanini (Lead Economist, WBI)
 11:15-12:00 Proactive policies
 Mallika Shakya (Economist, PRMTR)
 12:00-12:30 Q&As
2
Export Competitiveness Framework:
Key messages
 In practice, export competitiveness has
gained traction in many countries
 In theory, the EC literature is diverse,
evolving, but largely converging (Lucas,
Romer, Porter, Rodrik, Growth Commission)
 A flexible three-pillar framework can be
applied
 A growth area in the Bank anchor (trade
strategy, GPG, Aid for Trade) and country
operations (e.g, Mauritius)
3
Rapid growth is associated with openness
Real Exports / GDP
in 1997
1.2
1
0.8
0.6
0.4
0.2
0
-8
-6
-4
-2
0
2
4
6
8
10
12
14
16
Average real GDP per capita
growth (1997-2007)
Source: DECPG
4
The speed with which countries opened is
also positively associated with faster growth
Change in Real Exports / GDP
(2007-1997)
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
-0.2
-0.4
-8
-6
-4
Source: DECPG
-2
0
2
4
6
8
10
12
14
16
Average real GDP per capita5
growth (1997-2007)
Trend developing country growth has
become decoupled from trend highincome growth
Developing and high-income growth and trend growth
9
8
7
Developing countries
6
5
4
3
2
1
High-income countries
0
-11962
1967
1972
Source: World Bank, DECPG.
1977
1982
1987
1992
1997
2002
2007
6
Developing country exports increased faster
than GDP (and faster than world exports)
Average annual growth of GDP and Exports, 1990-2007
10
9
8
Real Exports
7
6
5
Real GDP
4
3
2
1
0
High income
Source: DECPG
Middle income
Low income
World
7
Technological progress in developing countries
has outpaced high-income countries
Percent change in technological achievement, 2000s vs 1990s
180
160
140
120
100
80
60
40
20
0
High Income
Source: World Bank
Upper Middle
Income
Lower Middle
Income
Low Income
8
Technology gap: narrowing but still wide
Index of technological achievement
120
100
1990s 2000s
80
60
40
20
0
High Income
Source: World Bank
Upper Middle
Income
Lower Middle
Income
Low Income
9
Diverse Literature and Evolving
Concepts and Associated Practice
 Recent and not-so-recent schools –
examples



Micro-foundation of competitiveness (Porter)
Industry-specific approach (Mc Kinsey)
Institutions (Rodrik and Sabel)
 Pervasive in the more “generalist” literature
(Lucas, Romer, Krueger, Bhagwati, etc.)
10
Concept (1) - Micro-Foundations Approach
 Sound macroeconomic policies and stable political
and legal institutions are necessary but not sufficient
conditions to ensure a prosperous economy
 Competitiveness, based on the productivity with
which nations produce goods and services, is rooted
in a nation’s microeconomic fundamentals
Michael Porter will deliver a lecture to Bank staff this
afternoon from 3:00 to 5:00 pm, Room I2-250
11
Concept (2) - Industry specific approach
 Methodology to examine the binding constraints in
factor markets in specific export industries of interest
to developing countries (garments, agriculture,
metals and minerals, tourism, light manufacturing)
 It is not about ‘picking winners’, especially in lowincome countries with obvious revealed comparative
advantages and limited institutional capacity
 It is about informing macro-policy making (e.g.,
exchange rate policy, fiscal policy, labor policy, land
policy, competition policy, etc.)

Source: Palmade (2005)
12
Concept (3) - Developing Right
Institutions
 Market failures contribute to slow growth and
demand proactive policies
 New approach to ‘Industrial policy’ to speed up
the process of structural change towards higher
productivity activities



Emphasis on getting right the strategic collaboration with the
private sector
Emphasis on processes and procedures as opposed to specific
policy instruments or sectors (old industrial policy)
Gradual, cumulatively transformative change through
identification of bottlenecks and self-correction
Source: Hausmann, Rodrik, and Sabel (2003, 2004, 2007)
13
A stylized observation: Export
Diversification – Products and Markets
Expanding existing products in existing markets has greater weight in export growth
than diversification into new product and into new geographic markets
14
Source: Brenton and Newfarmer (2007)
DTISs - Precursor Work on Export
Competitiveness
 About 40 DTIS completed, of which 23 in
Africa
 Focus on impediments to export growth in
low-income countries
 Main findings:




Addressing at-the-frontier obstacles important,
but not sufficient
Importance of the behind-the-border agenda
Trade logistics
Standards
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The Three-Pillar Framework
Incentive Framework
The necessary macro and trade policy
Conditions for trade growth
Services and Costs
Improving the business enabling
environment and Infrastructure for exports
Overcoming market and government failures
Making markets work for trade through public-private dialogue,
adaptation of technology and quality,
institutions and policies for export promotion,
special zones, global linkages
incentives like trade finance, matching grants, duty drawbacks,
industry-specific policies and constraints
16
A flexible framework adaptable to
country circumstances
 First generation reforms yet to be completed
in many LICs despite macro-stabilization
achievement
 It includes:




Addressing the anti-export bias
Improving functioning of factor markets
Strengthening the regulatory and
administrative environments
Investing in trade infrastructure including
transport, energy, and trade logistics.
17
Implementing the Export
Competitiveness – Current Status
 Implementation in a number of country ESWs
and lending

Mauritius, Mozambique, Tanzania,
Madagascar,Tunisia, Egypt and Libya
 Scaling-up of trade work in the Anchor
 Benchmarking indicators and database: LPI,
WTI, WITS, and soon SEZ worldwide
database; global Buyers’ studies
 Toolkits: Revenue impact of tariff reforms
(TRIST);
 Learning activities: Porter; Bhagwati; BBLs
 Additional resources: BB and MDTF
18
Example: Mauritius Competitiveness Review:
Far-Reaching Recommendations
 Long-term decline in competitiveness and “triple trade shock”.
 Move resources – labor, land, investment capital -- out of
inefficient activities and into internationally efficient ones
 Incentive regime




Move to duty free island (end of EPZ status and normal system of VAT
rebates on exports)
Reform corporate income tax
Release land and labor from sugar to alternative uses
Early depreciation of rupee
 Opening of the air transport market to support growth in tourism
 Strong telecom regulation to curb monopoly practices
 Reform ports and upgrade facilities to develop global
transshipment and become a regional hub
 Access to training


Target unemployed, not only employed
Develop higher skills: greater investments in particular schools (e.g., the
Hotel School of Mauritius), improvements in university courses leading to
employment in high growth sectors (such as tourism and ICT).
19
Some Caveats to the Focus on
Export Competitiveness
 Not an end in itself but a growth vehicle


It is ultimately about imports (of technology)
It is part of a global positive sum gain
 Export Competitiveness is not always a priority
 It is not exclusively or mainly about countries !
20