Enhancing Export Competitiveness in GCC and Yemen Lessons from Singapore and other international experiences Parth S. Tewari Head, Competitive Industries Practice The World Bank Group, Singapore 14 th GCC Industrialist Conference, Muscat, March 31st, 2014
Today’s discussion • The broad context of the region • Some principles for enhancing export competitiveness • Specific learnings from Singapore and other countries
Today’s discussion • The broad context of the region • Some principles for enhancing export competitiveness • Specific learnings from Singapore and other countries
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 “Most countries know now that the “Private companies in GCC expected to model of simply employing nationals in generate 600,000 local jobs by 2018, the GCC in the public sector is not a one million less than the number of sustainable model, because the public nationals likely to come into the sector is running out of jobs to provide, labor market” - IMF because it’s not improving productivity,” Source : IMF 4
The jobs challenge comes with a backdrop of a historically volatile oil price environment World Oil Prices Source: BP 5
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) 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 Source: IMF 6
Outside-in perspective on the key need areas in GCC and Yemen Focus of today’s discussion 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
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 8
Today’s discussion • The broad context of GCC and Yemen • Some principles for enhancing export competitiveness • Specific learnings from Singapore and other countries 9
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 Active Expertise Trade and Facilitation Investments 10
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 Dynamic 4.Access to Finance Industry 5.Technology Development • Institutions (clusters, coordination mechanism, M&E) • Organize interventions • Supplier development programs • SEZs Foreign Active Expertise Trade and Facilitation • Tariff Barriers Investments • Non-Tariff Barriers • Strategic FDI – focus on both • Trade Infrastructure capital and expertise • Regulation • Ease of Doing Business • Free-trade agreements • Regional trade strategies 11
Singapore has achieved significant results in non resource based export development 220 Singapore’s share of World Basis points 38 7.6 0.05 0 ~0 Land Energy Basic Population GDP Trade materials Unemployment rate of <2% Source: World Bank; USGS; UN COMTRADE 12
The country has covered a lot of distance in the last five decades 1960 Today • No natural resource endowment • #1 Ease of Doing Business • Minimal industrial base (mainly in non- • #1 Gallup Net Migration Index durable consumer goods) • #1 skilled labor in Asia-pacific • Withdrawal of British military base • #2 WSJ Index of Economic Freedom • Low education base • #2 in best investment potential (BERI) • High unemployment (~9%) • #3 WEF Global Competitiveness Index • Small domestic market and loss of a • #11 Economist Quality of Life Index common market, i.e. Malaysia • Asia’s most “Tech-ready” City, PwC • Over-dependent on entrepot trade and Global IT Report servicing British navy base 13
Singapore’s export portfolio is diversified and dynamic 1995 2000 2005 2011 Chemical/bio products 14 Textiles
Today’s discussion • The broad context of GCC and Yemen • Some principles for enhancing export competitiveness • Specific learnings from Singapore and other countries 15
Some examples from Singapore and other countries on the holistic approach to enhance export competitiveness Strategy Key issues Some examples and lessons from Singapore and other countries relevant to GCC • Continually • Singapore has dynamically targeted key sectors for growth and Dynamic identify growth exports over time with a market sensing approach Industry industries • Skills development has been in-sync with market development (Bio- Development • Skills polis example) development • Malaysia achieves strong coordination and M&E across institutions • Institutions through PEMANDU; Singapore has built a strong institution to • Coordination develop trade (IE Singapore) • M&E • Various countries have developed supplier development programs to • Innovative promote exports from SMEs that are supplier to large anchor firms initiatives (Chile) Strategic FDI • Industrial FDI and exports success in Jurong Island, Singapore Foreign (both capital and • Knowledge FDI exports and success in Biopolis, Singapore Expertise and expertise) Investments • Free trade • Regional competitiveness strategies: Singapore-Malaysia-Indonesia Active Trade agreements Regional Special Economic Zone Facilitation • Regional trade • Successful in executing and leveraging FTAs (Singapore) strategies 16
Singapore has dynamically prioritized key sectors over time GDP per capita 80x in 50 years 40000 2000s: 35000 Innovation Intensive 30000 90s: GDP/Capita (US$) Technology Intensive 25000 20000 80s: Capital Intensive 15000 70s: What are the sectors GCC Skills Intensive 10000 countries and Yemen have identified as priority for 60s: 5000 investments and exports? Labour Intensive 0 1964 1968 1972 1976 1980 1984 1988 1992 1996 2000 2004 2008 1960 17
Enhancing competitiveness is an on-going process and takes time Export Innovative Orientation and Capital-intensive Import Substitution Labor-intensive Manufacturing Competitiveness Manufacturing 1965 - 1985 1986 - 1997 1960 - 1964 1997 - 2010 •Import tariffs, quotas •Focus on higher value-added •Twin engines approach of •Cluster development strategy Regulatory to protect infant industries (e.g. biomedical manufacturing and services adopted Environment manufacturing sciences) •Nationalized where private •Business friendly investment sector lacked expertise (GLCs) climate •URA’s 1971 concept plan •Jurong Industrial •URA instituted “impact-based” •Seven offshore islands Infrastructure provided industrial estates just Estate begins zoning reclaimed into Jurong Island outside central ring development •Industry-specific infrastructure •Plug-and-play industrial •EDB established in ’61 prioritized •2 technology corridors environment marked for development •Technical Education •Programs to nurture local •Survival-driven phase Skills & Department set up at the •ITE established for high quality science and R&D talent, and •Basic education Capabilities Ministry of Education technical and vocational attract foreign high skilled expands quickly •Skills training centers with Tata, education. labor introduced Rollei and Phillips •Local industry upgrading program •S$100 million start up •FDI in manufacturing through •EDBi, investment arm of •S$1 billion CDF launched to grant for EDB Financing Economic Expansion Incentives EDB, sets up department for catalyze high growth clusters •Loans to companies Act biomedical sciences from revenue surpluses •Services growth through •Biopolis set up headquarter tax incentives •Generic standard •Close coordination between •Major resource commitment •Singapore Sciences Park 1 built Innovation & factories industry and tech institutes made to science and R&D in •National Computer Board formed technology for technology sharing schools and colleges What are the sectors GCC countries and Yemen have identified as priority for investments and exports? 18
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