Eoin Gahan 03-04-09


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Eoin Gahan 03-04-09

  1. 1. Competitiveness and Policy Eoin Gahan, Forfás University of Limerick, 3 April 2008
  2. 2. Overview Background Competitiveness analysis NCC findings and the Government “Smart Economy” programm Priorities for long-term competitiveness
  3. 3. Work of the Forfás RTPF Department Regulation Review of regulatory changes, competition policy, regulatory impact analysis, administrative burden reduction Trade Ad hoc assistance in trade negotiation, long-term trade strategies, trade facilitation issues Policy Foresight Socio-economic scenarios, advanced telecommunications and their implications, future industrial structure, long-term energy policy
  4. 4. What is competitiveness? “ the ability of Irish-based firms to achieve success in international markets, so as to provide Ireland’s people with the opportunity to improve their living standards and quality of life. Improving living standards depends on, among other things, raising incomes through strong productivity growth and providing high quality employment opportunities for all. Given Ireland’s small domestic market, Ireland requires a vibrant exporting sector and must therefore maintain and develop its international competitiveness.” Annual Competitiveness Report 2008, National Competitiveness Council
  5. 5. Competing Concept comes from the enterprise level Competing on what? Price Quality Service Innovation Image Branding
  6. 6. National Competitiveness Krugman argued that national competitiveness is a meaningless concept, because it is enterprises, rather than than countries, that compete But in fact in countries do compete, and often with a strategic and long-term perspective Examples: Exports Investment Innovation Prestige events Tourism Natural resources Infrastructure
  7. 7. Competition for Investment The World Association of Investment Promotion Agencies (WAIPA) was established in 1995 As of the 31st of December 2007, the Association had 220 member agencies from 154 countries.
  8. 8. National Marketing: Japan The world's second-largest market 1. Sophisticated consumers with high purchasing power 2. World-class companies and SMEs with unique 3. technologies 4. Loyalty and commitment to long-term partnerships 5. World's center for technological innovation and product development 6. Access to new Asian markets 7. Favorable business climate 8. Rapidly growing broadband society 9. Expanding environmental market 10. Booming business in silver care and retirees Source: JETRO
  9. 9. Competition for prestige events To attract tourism and business travel expenditures World Economic Forum, Davos To encourage infrastructure development London Olympics To demonstrate national competitiveness or “arrival” South Africa Rugby World Cup Beijing Olympics Shanghai Expo To encourage scientific or business activity Dublin City of Science
  10. 10. Competition for Tourism Tourism a large share of GDP in many countries Often requires general upgrading of economic environment, health, security, and international connectivity Air links Telecommunications Banking Hotels, restaurants Can be specialised in sectors that have wider impact Education Health
  11. 11. Competition for Exports To pay for imports To diversify earnings base To balance bilateral trade
  12. 12. World Bank Analysis of Export Promotion Agencies (XPAs) For each $1 of export promotion, estimate a $300 increase in exports for the median XPA. Heterogeneity across regions, levels of development and types of instruments. Strong diminishing returns: small is beautiful. EPAs should have a large private sector share of the executive board, but also have a large share of public sector funding. Single strong country EPA better than proliferation of agencies Focus should be non-traditional exports or some broad sector orientation, rather than promoting overall exports. Expenditure better focused on on-shore export support services rather than on country image or marketing and market research activities.
  13. 13. Competitiveness Reports The Global Competitiveness Report: “first published in 1979 and its coverage has expanded each year since, now extending to 134 major and emerging economies” World Competitiveness Report : “One of the major differences between the WCY (IMD) and the GCR (WEF) is that, first, 331 criteria are comprised in the WCY compared to 126 in the GCR, and second, the latter puts more emphasis on survey data when compared to the WCY as we focus more on Hard statistics from international, national and regional organizations. This is one reason why the WEF can cover so many more economies (131) than we can (55) because it is nearly impossible to find any hard data for many of these economies. This also raises the issue of rankings almost entirely based on subjective opinion data that is difficult to manage efficiently and reliably. We prefer a more objective approach based on hard facts.”
  14. 14. Other Well-known Rankings Global Entrepreneurship Monitor (GEM) Transparency International Human Development Index (UNDP) Index of Economic Freedom (Heritage Foundation)
  15. 15. Sustainable and Competitive Enterprise…
  16. 16. Annual Competitiveness Report 2008 Volume 1: Benchmarking Ireland’s Performance Volume 2: Ireland’s Competitiveness Challenge
  17. 17. Prosperity Depends on Exports Merchandise exports, % of GDP, 2007 70% Exports to EU Countries Exports to Non-EU Countries 60% 50% 40% 30% 20% 10% 0% Luxembourg Sweden Germany Italy Hungary Netherlands Denmark France Finland EU-15 Poland Portugal UK Spain Ireland GNP Ireland GDP Source: Eurostat, External Trade
  18. 18. Sources of Growth Contribution of Net Exports to Growth 8% 6% 4% 2% 0% -2% Consumption Government Investment Net Exports -4% 2001 2002 2003 2004 2005 2006 2007 2008H1 Source: Forfás Calculations, CSO National Accounts
  19. 19. Benchmarking Summary Strengths Improving export performance in services Inward FDI remains strong Improving performance: infrastructure, education and R&D Government debt, while low, is increasing rapidly Weaknesses Falling world market share, driven by manufacturing Dependence on property and household borrowing has been exposed Rising unemployment Slow productivity growth Cost competitiveness remains poor – despite recent disinflation
  20. 20. NCC: Key Competitiveness Challenges Restoring Fiscal Sustainability 1. Managing the adjustment ► Regaining Cost Competitiveness 2. Particularly energy competitiveness ► Implementing Public Services Reform 3. Maximising coherence within and across the system ► Positioning for the Upturn 4. Development of Long-term Strategy for Economic ► Recovery
  21. 21. Building Ireland’s Smart Economy 1. Meeting the Short-term Challenge – Securing the Enterprise Economy and Restoring Competitiveness – timeline: short-term, immediate actions Secure Ireland’s Enterprise Economy Investment in infrastructure Restoration of public finances Special Group on Public Service Numbers and Expenditure Programmes Broaden tax base Recapitalisation programme for credit institutions up to EUR10bn Maintain corporation tax rates Reduce administrative burden on business by 25 per cent by 2012 Measures to re-invigorate international financial services industry
  22. 22. Building Ireland’s Smart Economy 2. Building the Ideas Economy – Creating ‘The Innovation Island’ – timeline: short-term, out to 2013; ‘Innovation Fund – Ireland’ to support early stage R&D-intensive SMEs More favourable tax treatment of carried interest of venture capital Remittance basis of taxation Fast track visa arrangements Implementation of STI strategy SFI to continue to build Ireland’s world class research capacity European City of Science 2012 – bolster Ireland’s reputation Continuation of Schools Broadband Programme Enterprise Ireland to build on its offices in Asian & other high growth markets New Knowledge Society Strategy by mid-2009
  23. 23. Building Ireland’s Smart Economy 3. Enhancing the Environment and Securing Energy Supplies – timeline: between most to be complete by 2009-2012, some looking out to 2020-2025; 40% target electricity from renewable sources by 2020 East West interconnector will be completed in 2012 Publication of National Sustainable Transport and Travel Action Plan
  24. 24. Building Ireland’s Smart Economy 4. Investing in Critical Infrastructure – timeline: short- term, out to 2012; Continue investment under Transport 21 Investment in national transmission grid, electricity interconnector, broadband network National Broadband Scheme 5. Providing Efficient and Effective Public Services and Smart Regulation – timeline: short-term, 2009 Special Group on Public Numbers and Expenditure Programmes recommendations Administrative Burden Reduction Programme to be introduced Strengthening of system of RIA
  25. 25. Long-term competitiveness There can be contradictions between short-term and long-term competitiveness priorities Long-term competitiveness is based on economic sustainability considerations But should also be based on global trends Should also be based on a credible views of the future internationally Requires flexibility of systems and responses
  26. 26. Targets and performance Competitiveness is a relative concept Should we use targets? Yes, but without some specification of the means by which they are to be achieved they will be counter-productive Can we be the best in everything? No, because we can’t be and we don’t need to be Should we try to be the best in anything? Yes, because efforts need a focus Missing the target may still deliver a good result Multi-dimensional problems: internal consistency
  27. 27. Why Government Foresight? Government is often obsessed by short-term and ‘reactive’ attitudes. It is affected by the pressure of public opinion and the media who demand quick solutions to problems. One of the greatest challenges for government is to balance short-term pressures and long-term objectives. Many areas of public policy, such as ageing, health, education, urban infrastructure, and the environment, can only be addressed adequately over the long term OECD Review of Irish Public Service
  28. 28. Futures Activities in Ireland ICSTI Technology Foresight Forfás NanoIreland Teagasc 2030 IPA Ireland 2022 EPA 2020 Marine Institute 2020 NESDO Futures Ireland EGFSN National Skills Strategy 2020 Forfás Socio-economic scenarios 2025/2040
  29. 29. Socio-economic Scenarios 2025/2040 The Key Strategic Question: In the context of broader societal goals such as prosperity and full employment, social justice and equity, security, liberty and well-being ……… What decisions should be made to ensure a sustainable competitive enterprise sector in 2025 and 2040?
  30. 30. Demo- graphics Education Energy Social Technology Values Forces of Infra- Climate Forces of Change Change structure Change What will shape the world in 2025? World Governance Economy Quality of Natural Life Resources Conflict
  31. 31. Critical Uncertainties The trends / issues that have the highest degree of uncertainty and the highest impact on the key strategic question. They are factors that are outside our control Four critical uncertainties Changing nature of energy supply and security 1. 2. Consistency and complexity of regulation and response to climate change and environment 3. Who / what is driving and shaping the world economy? 4. Interaction, differentiation and focus of social values and systems
  32. 32. Selected specific priorities Next-Generation Networks eGovernment Globalisation strategy
  33. 33. Next-Generation Networks
  34. 34. Speed and Annual Cost of Fastest Incumbent Business ADSL Service, October 2008 (Teligen data) 60 Higher speeds/lower costs 50 DK JP Download Speed (Mb/s) 40 30 PT FI GR SE 20 NL IT MT FR DE AT LU BE IE 10 UK EE HU KR PL CH IS LV CY LT SK ES SI 0 3500 3000 2500 2000 1500 1000 500 0 Annual Cost €/PPP ex cl. VAT
  35. 35. NGNs and competitiveness We have a relatively high reliance on traded services, and future traded services will depend on access to next generation services. Next generation services will be a crucial enabler of the industries and technologies promoted and supported by the development agencies. Next generation services will facilitate trade with remote locations. They will mitigate the disadvantages of our geographic remoteness and will enable us to access global markets from our regional cities and towns as well as from Dublin.
  36. 36. NGNs and competitiveness As a developed and relatively high cost location we need to be among the leaders in using ICTs to maintain the high productivity (in both traded and non traded activities) necessary to compete Next Generation Networks (NGNs) will provide the basis for a new range of information intensive service industries, particularly in the areas of business and consumer software applications, digital media, entertainment, education, and health. They will also provide a test-bed for new technological developments in software and equipment, including those being developed under SFI auspices. Future social and quality of life improvements, which next generation services will enable (remote access to education, healthcare, entertainment and social networking), can help to attract and retain the kind of highly skilled people our economy will require.
  37. 37. Informatisation White Paper (Korea)
  38. 38. Informatisation White Paper (Korea) E-Readiness Index (EIU) Rank: US 1 Korea 15 Ireland 21 France 22 Components Connectivity and Technology Infrastructure Business Environment Social and Cultural Environment Legal Environment Government Policy and Vision Consumer and business adoption
  39. 39. Informatisation White Paper (Korea) Networked Readiness (WEF) Ranking Denmark 1 Korea 9 Ireland 23 Environment (Market,Political Regulatory, Infrastructure) Readiness, Usage Individual, Business, Government
  40. 40. Informatisation White Paper (Korea) Digital Opportunity Index (ITU) Rankings Korea 1 Ireland 31 Components Opportunity Infrastructure Utilisation
  41. 41. NGN Recommendations Bundling all the existing State telecommunications assets (commercial semi state, local authorities, MANs); Providing, or tendering for the provision of, a fully open access next generation network for advanced telecom services in Dublin by 2010, in the gateways by 2012, in hub and county towns by 2015; Use the “digital dividend” to optimise potential of wireless and ensure future spectrum availability for NGN services; Develop coherent and committed approach across government departments to aggregate demand for broadband services outside of the main urban centres; Developing a next generation broadband implementation plan by the end of 2008; Dedicated Government unit, fully-resourced and empowered to coordinate activities of public sector to ensure consistency in approach and planning, economies of scale in civil engineering works, providing open access at the highest levels of service to operators
  42. 42. eGovernment
  43. 43. What is eGovernment? Use of ICT by Government to exchange information with and provide services to citizens businesses other departments within Government Object is to improve the delivery of public services and processes Includes transforming all aspects of service delivery and developing a ‘customer’ focus
  44. 44. Why is eGovernment important? Improves public sector productivity Provides more integrated information for Government User-friendly eGovernment solutions facilitate more Business-to-Government interaction Reduces the administrative burden on businesses, which is particularly important to SMEs Can sensitise business to the importance of ICT Improves international credibility of a modern economy
  45. 45. eGovernment in Ireland Ireland was a recognised leader at the outset of the eGovernment era 2001: Ireland was 1st in the EU15 for on-line sophistication of public services (EU survey of online services) Ireland’s European standing in eGovernment has declined since 2001 2007: Ireland now at the upper end of the 3rd quartile for sophistication of on-line services The situation for on-line services to businesses is worse: Ireland is at present 22nd of EU-27 Nevertheless, Revenue Online services widely used and well regarded CRO has increased electronic reporting Other services (such as motor tax) also very efficient
  46. 46. Comparison of Customer Service Agendas across Countries - Accenture Maintaining Status Quo Moving Toward Value Creation Among the Leaders Maintaining Status Quo Moving Toward Value Creation Finland Canada United States United States Japan Singapore France France Norway Australia Denmark What was the country’s rank in the customer service leadership Falling Further Behind? Verging on Dramatic Change Falling Further Behind? Verging on Dramatic Change in 2005 The Netherlands Italy United Kingdom United Kingdom Sweden Malaysia Spain Spain Germany Portugal Belgium South Africa Not Among the Leaders Ireland Brazil Standing still Progressing What’s happening with the customer service strategy?
  47. 47. Recent Developments Comptroller and Auditor General’s Report on eGovernment, October 2007 OECD - Ireland: Towards an Integrated Public Service, 2008 Following the reports, Government took action as follows: Department of Communications, Energy and Natural Resources given responsibility for knowledge economy: Strategy in 2010 The Department of Finance - Centre for Management and Organisation Development (CMD) has taken over responsibility for the public service broker, REACH
  48. 48. Building Ireland’s Smart Economy, 2008: eGovt aspects Continued investment in broadband infrastructure is priority: rollout of the national Broadband scheme Priority eGovernment projects will be developed in all sectors of the Public Service to facilitate information sharing across public service bodies and to improve value for money and standards of service Accelerate the Administrative Burden Reduction Programme to reduce the volume and frequency of data required from the public Central data store will be established to allow public bodies maximise the re-use of data
  49. 49. Administrative Burden Reduction Government decision – March 2008 – to reduce administrative burden on business by 25 per cent by 2012 EU target for European legislation also 25 per cent reduction Ireland: currently identifying most burdensome legislation on enterprise. Will lead to detailed measurement of burdens and simplification of information obligations ICT solutions can reduce burden through: improved process – online and pre-populated forms. Data-sharing – within government and automatic data collection from enterprise. Improved communications - business-centric
  50. 50. Administrative Burden Reduction eGovernment activities underway to reduce administrative burden: Companies Registration Office conducting XBRL pilot for e-filing of Annual Reports Revenue Commissioners as ‘trusted third party’ to provide authentication service of digital certificates to CRO and to the Property Registration Authority Revenue currently authenticates Change of Vehicle Ownership for Dept. of Transport Future activities: Central data store to maximise reuse of data – arising from Building Ireland’s Smart Economy
  51. 51. Energy
  52. 52. Four Objectives for Energy Policy – The Tetralemma Competitiveness: we want to keep our energy costs as low as possible, and lower than those of our competitors Security of Supply: we want to provide against discontinuities in our energy supply in terms of a physical disruption or a price shock/price volatility Sustainability: we want to ensure that the necessary energy resources are there in the future Climate change: we want to reduce our contribution to global warming via our reduction in greenhouse gas emissions
  53. 53. Long-term energy choices Will affect our competitiveness, security, sustainability and our contribution to climate change Will also affect the enterprise base and the opportunities for growth and innovation
  54. 54. The Energy System Energy Conversion Final Use Energy Transmission & Distribution Extraction Residential Exploration •New and Upgraded •Building Heating ICT Infrastructure Assessment & Advice Combined Heat and Equipment •Eco Construction Power •Grid Access •Building Materials Geothermal Primary Energy (Large – Micro) District Heating (Build & Retrofit) Industrial 1.Fossil Fuels •ICT - Smart Grid •Smart Motors Coal - CCS •Energy Efficient Gas •Smart Metering Process 2.Renewables Supply/Demand Wind Management Ocean Services (Public & Solar •Data Carrying Commercial) Biomass •Onsite Generation •Outsourced Energy Management •ICT Control Energy Storage: (under chemical, mechanical, electrical forms… Systems General Interconnection Hydro Superconductors Transport Transport UK Batteries Compressed Air Electric Vehicles Biofuels France Hydrogen Smart Logistics Underlying Activities ICT Energy monitoring and control systems Nanotechnology applications R&D Green Tech Investment & Carbon trading Project Management Equipment and appliance manufacture and service
  55. 55. Opportunities in the Energy-Related Goods and Services Sector smart grid development with software, sensors and ICT applications; energy-efficient ICT management; nanotech applications in energy related materials and systems; electricity interconnection to support renewable generation and export excess capacity, carbon capture and storage; renewable generation particularly wind and bio-energy; renewable heat in terms of solar thermal and geothermal; outsourced energy management and onsite heat and power generation facilities; marine-energy technologies; and eco-construction related materials, products and services;
  56. 56. Impact on long-term competitiveness Productivity Export Cost Enterprise potential competitiveness creation Next Generation Networks eGovernment Energy
  57. 57. Globalisation strategy
  58. 58. Globalisation Strategy On a globe, any country is the centre Ireland’s past success can be seen as a transatlantic bridge The future requires an even wider view of possibilities Increasing economic weight of the BRICs and Ireland’s economic strengths can lead to facilitation of new linkages NGNs are essential to achieve the potential A hub approach to international transport is also important Also needs cultural (languages) and regulatory (Schengen) change
  59. 59. Thank you! Eoin.gahan@forfas.ie www.forfas.ie