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Policy Dimensions of Structural Change

VIEWS: 12 PAGES: 53

									Assessing and benchmarking
industrial Performance: the
UNIDO Scoreboard

Sanjaya Lall, Oxford University




UNIDO/DTI competitiveness
conference, South Africa, June 2004
Successful industrial and competitive
performance must be analysed in the
new global context.

This is changing rapidly and in ways that
call for new types of strategic responses
International rather than national
competitiveness is now the ‘bottom line’
 Widespread liberalization means that all firms face
 global competition domestically and, of course, in
 export markets
 Competition arises from new (and often
 unexpected) sources as more countries enter
 world markets and liberalize policies
 Competition is not only for markets but also for
 scarce mobile resources: capital, technology, skills
 and value chains
 Competition is more intense than ever because of
 shrinking economic distance
This is driven by rapid and pervasive
technical change

      The ‘death of distance’ opens opportunities: new
      markets and inputs and allows narrower forms of
      specialization in ‘fragmented’ production

     Innovation changes structure of industrial
     and export activity, shifting it towards
     technology-intensive products and industries
     – constant upgrading becomes critical

     The pace of innovation makes it imperative for
     all activities to access new technologies, while
     raising entry levels for competitiveness in skills,
     capabilities, institutions and infrastructure
The organisation of production,
innovation and trade are also changing


          Thus: Globalization offers new markets and
          resources but building competitiveness needs
          more than primary resources or cheap labour – it
          needs STRATEGY

          It leads to tightly knit global value chains, with
          stronger role for lead players (MNCs or buyers)
          and higher minimum entry levels

          Globalization raises the role of MNCs in
          innovation, technology transfer, production and
          particularly exports. Around 2/3 of world trade is
          handled by MNCs, about 1/3 is within companies
‘Slippery slopes and sticky places…’

   Increasing mobility of information and productive
   factors, and the unremitting search for new (low cost
   and efficient) locations for production, R&D,
   marketing or procurement – ‘slippery slopes’ – does
   not mean that factors spread evenly over lower
   wage countries
   Efficient production requires local capabilities to
   complement the mobile factors and make them take
   root – ‘sticky places’
   Host countries must meet the technological, skill,
   flexibility, quality and reliability needs of competitive
   production: this does not happen automatically with
   liberalization
Some indicators of changing industrial
and trade structures
Technological structures


 Primary products
 Manufactured products
   RB (Resource based): e.g. food, wood & forestry
   products, processed minerals, petroleum products
   LT (Low technology): e.g. textiles, clothing, footwear,
   toys, sports goods, simple metal products
   MT (Medium technology): e.g. automotive products,
   TVs, machinery, chemicals, steel
   HT (High technology): Advanced ICT and
   electricals, pharmaceuticals, aerospace, precision
   instruments
US National Science Board: growth of hi-tech
and other manufacturing production in 1980-98



16%
                                                                                                                        Total                  Hi-tech

14%

12%

10%

8%

6%

4%

2%

0%




                                                                                                                         Industrialized
                                                                                                   H Kong

                                                                                                            Argentina




                                                                                                                                                       68 countries
                                                     Korea

                                                             China
            Japan




                                                                                 Brazil
                                   France




                                                                     Singapore




                                                                                                                                          Developing
                                            Taiwan




                                                                                          Mexico
                         Germany
                    UK
      USA




-2%
      The 5 fastest and 5 slowest growing industrial activities in
      1980-2000
                          World                                        Developing countries
-3%    -2%    -1%     0%       1%        2%   3%       4%    0%     2%           4%     6%             8%       10%


                                                     Other                                               Electr.
                                                    chems.                                              Machinery,

                                                   Tobacco                                     Indtl chems,

                                               Electr.
                                                                                         Instruments,
                                              Machinery
                                               Printing,
                                                                                        Trans equip,
                                                 publ.
                                               Plastic                                 Other
                                               prods.                                 chems,
                           Pottery,
                                                                         Furniture,
                            china

                          Iron & steel                                   Apparel ,

               Textiles                                              Textiles,

         Apparel                                                  Footwear,

                                                                    Wood
 Footwear                                                         products,
Exports: growth rates by technology

20%
                                  1980-1985   1985-1990   1990-1995   1995-2000
18%
16%
14%
12%
10%
8%
6%
4%
2%
0%
      Manufactured exports   RB                     LT                   MT       HT
            Shares of manufactured products in world exports
               by technology levels from 1976 to 2000 (%)
35

                     Resource
30
                      based                                                     High
                                                   Medium
25                                                                        Technology
                                               Technology
20


15


10                                                                        Low
                                                                   Technology
5


0
     1976



              1978



                       1980



                              1982



                                     1984



                                            1986



                                                     1988



                                                            1990



                                                                   1992



                                                                            1994



                                                                                       1996



                                                                                              1998



                                                                                                     2000
 Technology composition of 50 fastest growing exports,
 1990-2000 (percentage shares)

60
               1990
               2000
50


40


30


20


10


 0
     Primary          Resource based   Low technology   Medium technology   High technology
How are developing countries doing in
this evolving scene?




  Surprisingly well overall
Growth rates of developing countries are higher in
‘complex’ MT and HT exports
                     Growth rates of manufactured exports by technology 1980-2000
                           Industrialized countries        Developing countries
25%




20%




15%




10%




 5%




 0%
      All manufactures    Resource based        Low technology    Medium technology   High technology
So its world shares of complex exports is rising rapidly
– and is already significant


40%              1981
                 2000
35%

30%

25%

20%

15%

10%

5%

0%
      All manufactures   Resource based   Low technology   Medium technology   High technology
 In fact, developing world values of HT exports now far
 exceed those of LT and RB exports ($ billion)

450


400                     RB   LT   MT     HT


350


300


250


200


150


100


 50


  0
        1985         1990              1995     2000
But industrial and export success is
highly uneven in the developing world
 Regional shares of global manufacturing value
 added in 1980, 1990 & 2000

                Figure 1: Dev eloping regions' shares of global MVA (%)
14.0


12.0                                                                               1980
                                                                                   1990
10.0
                                                                                   2000

 8.0


 6.0


 4.0


 2.0


 0.0



                                                                      MENA
                      S. Asia




                                              LAC




                                                                             SSA
       E Asia
And changes in MVA shares, 1980-2000


                    Changes in shares of global MVA (% points)

                                                                     1995-00
        SSA
                                                                     1990-95
                                                                     1985-90
      MENA
                                                                     1980-85

        LAC


      S. Asia


      E Asia


 -1             0       1               2               3        4             5
         Developing regions: Evolution in World Medium and High Tech MVA share (%)
14%
                                                                        East Asia

12%


10%


8%


6%

                                                                         Latin America
4%


2%                                                                         South Asia
                                                                Middle East & North Africa
0%                                                                  Sub-Saharan Africa
  1980               1985                1990               1995                    2000
East Asia (with and without China) also
dominates manufactured exports
                                Wor ld mar ket shar es f or manuf act ur ed expor t s ( %)

20%                           1981            1985          1990                   1995               2000
18%

16%

14%

12%

10%

8%

6%

4%

2%

0%
      East Asia   East Asia (exc. China)   Latin Amer ica   Latin Amer ica (exc.     Middle East &Nor th     South Asia   Sub-Sahar an Af r ica
                                                                  Mexico)                  Af r ica
Changes in world market shares for manufactures
in 1980s and 1990s show evolving dynamism


                          Figure 6: Changes in world market shares for manufactures (% points)

                                                    1981-90     1990-2000

 8%

 7%

 6%

 5%

 4%

 3%

 2%

 1%

 0%
       East Asia excl.   China      South Asia       MENA          LAC excl       Mexico         SSA exc. S   S Africa
 -1%
           China                                                    Mexico                         Africa
       Regional market shares of developing world
       manufactured exports, 1985 and 2000


                      1985                                        2000
   SSA


                                HT
                                MT
MENA                            LT
                                RB


S. Asia




 LAC 2




 LAC 1




E. Asia



                                           0%   10%   20%   30%   40%   50%   60%   70%   80%   90%
-10%      10%   30%     50%   70%    90%
Leading 10 developing country exporters of manufactures


                                                                                                                                1990
                                 Top ten exporters of manufactures in the developing world ($ m.)
                                                                                                                                2000
  250
                                                                                                                                2001



  200




  150




  100




  50




   0




                                                                                                          India
                                                                                     Indonesia
                Korea
        China




                                                                          Thailand
                                                   Singapore




                                                                                                 Brazil




                                                                                                                  Philippines
                        Taiwan



                                        Mexico




                                                               Malaysia




                                                                                                                                Turkey
At the country level, export concentration in
developing world is rising

                     Shares of leading countries in exports of manufactures by developing world

                                            Top 5       Top 10        Top 20




   2000




   1990




   1981




          0%   10%     20%         30%         40%         50%         60%         70%            80%   90%   100%
  Leading developing HT exporters

90,000
                                                                                                       1990      2000         2001
80,000

70,000

60,000

50,000

40,000

30,000

20,000

10,000

    0




                                                                                                        Brazil
                              Korea


                                      China




                                                                                                                               India
                                              Malaysia
         Singapore




                                                                  Philippines




                                                                                           Indonesia
                                                         Mexico
                     Taiwan




                                                                                Thailand




                                                                                                                  Hong Kong
                   10,000
                            20,000
                                     30,000
                                              40,000
                                                       50,000
                                                                60,000
                                                                           70,000




               0
     Mexico


      Korea


      China


     Taiwan


 Singapore


   Malaysia


   Thailand


      Brazil


  Indonesia


South Africa
                                                                                    Leading medium technology exporters

                                                                         1990




     Turkey
                                                                         2000




       India
                                                                         2001




  Argentina
                                                     100,000
                                                                 120,000




                 20,000
                          40,000
                                   60,000
                                            80,000




             0
   China


  Taiwan


   Korea


  Mexico


    India


Indonesia


  Turkey


 Thailand


  H Kong
                                                                           Leading low technology exporters




Singapore
                                                               1990




 Malaysia
                                                               2000




 Pakistan
                                                               2001




    Brazil
                           10,000
                                    15,000
                                             20,000
                                                        25,000




                   5,000



               0
      China


  Singapore


      Korea


      Brazil


  Indonesia


       India


Saudi Arabia


   Malaysia
                                                                 Leading resource based exporters




   Thailand


  Venezuela
                                                      1990




     Mexico
                                                      2000




South Africa
                                                      2001




      Brazil
A few words on service exports, not
traditional services but the new set of
‘outsourced’ or, more correctly,
‘offshored’ services…
What are offshored services?

   Call/contact          Shared                IT services        Innovation            Regional
  centre services        Service                                   services           headquarters
                         centres
                         (back-office
                         services)
 Help desk               Claims processing   Software          Basic research      HQ
 Technical               Account             development       Applied research    Coordination centre
      support/advice          processing     Application             and design    Regional marketing and
 After-sales             Transaction              testing      Product                 other services
 Employee enquiries           processing     Content                 development   Technical support
 Claims enquiries        Query               development       and adaptation      Other services
 Customer                     management     Engineering and   Testing and
 support/advice               processing     design            customization
 Market research         Customer            Product           (e.g. drugs)
 Answering services      administration      optimisation
 Prospecting                  processing
 Information services    HR/Payroll
 Customer relationship   processing
      management         Data processing
      (CRM)              IT outsourcing
                         Logistics
                              processing
                         Quality assurance
                         Supplier invoices
Service exports (call centres, shared service centres and IT
services): new FDI projects in 2002/3
             Numbers of offshore FDI service projects by destination (2002-3)

                                                                             Developed countries = 620
300



250



200



150



100



 50



 0
      SSA     MENA          South Asia     East Asia         LAC         Central Asia      Dev eloped




The total market for offshored services was $32 b. in 2001
      Service exports by country

                           Leaders in number of offshore service projects in the world (2002-3)


250



200


                                                                                               Leaders in number of offshore service projects in developing countries (2002-3)
150

                                                250
                                                                               R&D offshoring is starting: WIPRO of India is now the world’s
100
                                                                            biggest R&D services provider, with about $300 million in earnings
                                                                              selling R&D services, with 6,500 researchers. It is one of several
                                                200
50
                                                                                                 R&D contractors in India

                                                150
 0
      India




                                                                                                                                                                           France
                   China


                             Canada




                                                 Singapore




                                                                                                                                                                                                  Malaysia
                                                                                   Australia




                                                                                                                             Argentina


                                                                                                                                                    Netherlands
              UK




                                                                                                           USA




                                                                                                                                                                                                                  Sweden


                                                                                                                                                                                                                               Japan
                                      Ireland




                                                                 Germany




                                                100



                                                50



                                                 0
                                                                                                                                                                  Turkey




                                                                                                                                                                                                                                            Taiwan


                                                                                                                                                                                                                                                     Thailand
                                                             India




                                                                                                                                                                                                                       Chile




                                                                                                                                                                                                                                                                Korea


                                                                                                                                                                                                                                                                        S Africa
                                                                           China




                                                                                                                                                                                                                                  Uruguay
                                                                                               Singapore




                                                                                                                                         Malaysia
                                                                                                                 Argentina




                                                                                                                                                                                    Philippines




                                                                                                                                                                                                                                                                                   Mexico
                                                                                                                                                                                                         H Kong
Benchmarking competitive industrial
performance at the national level…

The UNIDO Scoreboard provides a transparent
and flexible way to compare critical aspects of
performance, focusing on measurable
variables

It provides a ‘first cut’ at mapping the strategic
dimensions of performance and its major
structural drivers
What is the UNIDO Scoreboard?


 National benchmarking of industrial performance
 and drivers for all countries with sizeable industrial
 sectors (and data)
 The Competitive Industrial Performance Index
 (CIP) benchmarks ability of countries to produce
 manufactures competitively
 The drivers benchmark selected structural
 capabilities that affect sustainable and competitive
 industrial performance
Components of Competitive Industrial
Performance (CIP) Index



                           MVA per capita




    Industrialization
                                                 Export quality
        intensity


                                                    Mfd
     MVA      MHT                                 exports
                                                             MHT %
      %        %                                  % Total      Mfd
     GDP      MVA                                 exports    exports

                        Mfd exports per capita
  CIP indices at the regional level, 1980 to
  2000
                                   Figure 5.4: Regional CIP indices    1980        1990   2000
1.0
0.9

0.8
0.7
0.6

0.5

0.4
0.3
0.2

0.1
0.0
      Industrialized   East Asia          LAC              MENA       South Asia          SSA
Components of CIP index

 CIP index components by region

                                                                                           MHT %
                                   Manufactured                           Manufactures
                                                                                          manufac
                    MVA p.c. ($)       exports    MVA % GDP   MHT % MVA       % total
                                                                                          tured
                                       p.c. ($)                               exports
                                                                                          exports
                                                   1980
 Industrialized        3,772          1,330         22.6%       57.6%        83.3%       59.9%
 LAC                    680            109          24.3%       41.5%        40.0%       28.2%
 East Asia              107             60          25.3%       41.9%        57.8%       37.5%
 MENA                   247             97          9.5%        28.6%        11.2%       10.4%
 South Asia             35              8           14.1%       48.4%        59.9%       17.2%
 SSA                    87              25          14.1%       43.4%        17.2%       17.5%
                                                   2000
 Industrialized        5,205          3,967         20.8%       62.1%        87.3%       67.8%
 LAC                    627            484          20.5%       47.4%        72.7%       58.5%
 East Asia              462            489          34.7%       58.0%        90.8%       63.2%
 MENA                   376            212          16.0%       37.9%        35.3%       24.4%
 South Asia             82              40          17.0%       54.3%        82.1%       15.6%
 SSA                    70              48          12.5%       41.2%        37.4%       28.6%
 Source: UNIDO Scoreboard
CIP ranks in                                                                      17 to 30
                                                     17. Italy
1998                                  18. Korea


                              19. Spain
                                                                                  9 to 16

                    20. Israel
                                                              9. Belgium

                                                          10. UK
              21. Norway

                                              11. France
                                                                                   4 to 8
           22. Malaysia
                                       12. Austria

            23. Mexico                                                     4. Japan
                                    13. Denmark
                                                                   5. Germany
       24. Czech Republic                                                               Top 3
                                                                      6. USA       1. Singapore
                                  14. Netherlands
                                                                                  2. Switzerland
                25. Philippines                                    7. Sweden         3. Ireland
                                              15. Taiwan
                                                                     8. Finland
                            26. Portugal
                                                     16. Canada
                                   27. Hungary                                                 30. Hong Kong
                                           28. Slovenia                                29. Australia
CIP ranks in                                                                         17 to 30
                                                       17. UK
2000                              18. Canada


                        19. Denmark


                                                                                     9 to 16
               20. Hungary
                                                                9. Taiwan

                                                      10. Korea
              21. Israel

                                               11. USA
                                                                                         4 to 8
            22. Spain
                                        12. Austria

         23. Thailand                                                       4. Finland
                               13. Netherlands
                                                                     5. Sweden
              24. China                                                                     Top 3
                                                                     6. Japan         1. Singapore
                                    14. France
                                                                                        2. Ireland
             25. Philippines                                      7. Germany         3. Switzerland
                                           15. Malaysia
                                                                     8. Belgium
                           26. Mexico
                                                         16. Italy
                               27. Hong Kong                                                       30. Norway
                                         28. Portugal                                      29. Poland
  What drives competitive success? First,
  the ability to produce/export efficiently…

                   Ability to raise MVA and exports depends on:
                     Access to best practice technology and
                     organizational techniques
    CAPABILITIES




                     Availability of natural resources for processing –
                     and capabilities to undertake capital intensive
                     processing
                     Availability of low cost but skilled labour,
                     complemented by technical & managerial skills
POLICES
INSTNS.
INFRST.




                     Efficient infrastructure and low business costs
                     Supportive policies and institutions
  MARKETS




                     Access to world markets on fair, predictable terms
   GVCS




                     Access to global value chains at arm’s length or
                     within companies
Industrial performance is diverging, but
why?
 Insufficient liberalization, macro instability and
 poor governance account for part
 But they don’t account for it completely – the data
 don’t suggest that liberalization by itself leads to
 competitive success
 Export growth and upgrading require other factors:
 careful strategy to build domestic capabilities by
 creating appropriate skills, raising technological
 effort, and tapping into global production systems
 via FDI. Service exports are slightly different but
 not entirely
Some indicators of these structural
drivers of industrial competitiveness
 R&D financed by productive enterprises ($ per capita)

                                    35


450
                                    30
400

350
                        1985        25
300
                        1998
                                                                                      1985
250
                                                                                      1998
                                    20
200

150

100                                 15

50

 0                                  10
                       Developing
      Industrialized




                                    5



                                    0




                                                                      SSA 1



                                                                              SSA 2
                                         EA 1


                                                EA 2




                                                                                      MENA
                                                       S Asia


                                                                LAC
               0.0
                     0.5
                           1.0
                                 1.5
                                       2.0
                                             2.5
                                                   3.0
   Sweden

     Korea

     Japan

      USA

  Germany

    Taiwan

        UK

 Singapore

     China
                                                         level (% of GDP, 1997-2000)




   S. Africa

      Brazil

  Malaysia

    Turkey

      India

 Argentina

   Mexico

Hong Kong
                                                         R&D financed by productive enterprises at the national




  Thailand

Philippines
     Skills: tertiary technical enrolments (per 1000
     people)

10

                                                                   1985
 9
                                                                   1998
 8

 7

 6

 5

 4

 3

 2

 1

 0
       Industrialized




                                                                      MENA
                                              LAC




                                                    S Asia
                        E Asia 1




                                   E Asia 2




                                                             SSA
                  0.2
                        0.4
                              0.6
                                    0.8
                                              1.2
                                                    1.4
                                                          1.6
                                                                1.8




              0
                                          1
     Korea


   Finland


    Taiwan
                                                                      population)




  Germany


      USA


     Japan


Philippines


   H. Kong


 Singapore


    Mexico


   Turkey


Indonesia
                                                                      National tertiary technical enrolments (1985-98, %




  Thailand


  Malaysia


    China
      Annual inward FDI (US$ per capita)
250




200
                                                              Early 80s
                                                              Late 90s


150




100




50




 0
                   E Asia 1




                              E Asia 2




                                                        SSA




                                                               MENA
                                         LAC




                                               S Asia
        Industr.
  Developing world FDI distribution

                Regional distribution of FDI inflows

  MENA
                                                       10 COUNTRIES GET 80% OF
                                                       FDI IN THE DEVELOPING
   SSA                                                 WORLD: AND THEIR SHARE
                                                       IS RISING OVER TIME
   LAC                                                 LARGE PART OF RECENT FDI,
                                                       PARTICULARLY IN LAC, IS NOT
                                              1993-7   IN MANUFACTURING OR
  S Asia                                               EXPORT-ORIENTED ACTIVITIES:
                                              1981-4
                                                       THE MAJOR EXCEPTION IS
E Asia 2
                                                       MEXICO


E Asia 1


           0%     10%    20%    30%     40%     50%    60%   70%
     Reliance on FDI varies greatly in EA (FDI %
     of gross domestic investment)
30
                                                                                                    1980-85
25                                                                                                  1994-97

20

15

10

 5

 0
                                     H Kong
                  China




                                                                                            Korea
                                                                                   Taiwan




                                                                                                              India
                          Malaysia
      Singapore




                                                            Indonesia
                                              Philippines




                                                                        Thailand
Conclusions: East Asian lessons

    There are many ways to build export competitiveness
    MNCs play a critical role in all strategies but countries
    access their technologies, skills and marketing prowess
    in different ways
    Korea and Taiwan used arm’s length strategies to tap
    FDI, building domestic skills, innovation and institutions
    by coherent industrial and technology strategies.
    Singapore used FDI targeting with skill & infrastructure
    development to plug into global production and upgrade
    rapidly. These have the best technology systems
    New Asian Tigers had weak capabilities, shallow
    technology base, inadequate skill creation systems.
    They are upgrading rapidly but many gaps remain
    All strategies have worked well so far, but their
    sustainability remains to be seen…
Autonomous strategies are less feasible, more risky:
   Acceleration of technical change
   Spread of global production networks
   Problems in managing selective industrial
   strategies
   New international rules of the game
FDI dependent countries are becoming less passive
as policies grow more standardized and governments
realize need to target
Importance of building strong technology systems is
increasingly accepted as need to move up technology
ladder and stay ahead of competition mounts (threat
of China galvanizing EA and other regions)
Least developed countries unduly neglect technology
policy and institutions: even low technology and
resource based industrialization needs higher
capabilities and stronger technology bases

								
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