Economic Freedom, Creativity and Development

1. Economic Freedom, Creativity
and Development
Yusuf Mansur
November 2013

2. “Human Development, as an approach, is concerned with what
I take to be the basic development idea: namely, advancing the
richness of human life, rather than the richness of the economy in
which human beings live, which is only a part of it.”
Amartya Sen
Development

3. Definition
Individuals have economic freedom when property they acquire
without the use of force, fraud, or theft is protected from physical
invasions by others and they are free to use, exchange, or give
their property as long as their actions do not violate the identical
rights of others.
James Gwartney and Robert Lawson et al.
Economic Freedom of the World: 1996 Annual Report
Economic Freedom
Economic Freedom is for the protection of political rights, national security, and property
rights. Among rights is intellectual property rights (IPRs).
Economic Freedom is also about freedom of exchange = Ease of Doing Business in
a stable economy and a competitive environment.

4. Creativity
Creativity: The process through which ideas are generated,
connected and transformed into valued products.
Creative Economy: Arts and film; Sciences; Technology; Sports
Scientific Creativity
Cultural Creativity
Economic Creativity
Technological Creativity

5. Forms of creativity
According to the UNCTAD Creative Economy Report 2010, creative
industries are defined as:
• The cycles of creation, production and distribution of goods and
services that utilize creativity and intellectual capital as main inputs
• A set of knowledge-based activities, focused on but not limited to
arts, that potentially generate revenues from trade and IPRs
• Tangible products and intangible intellectual or artistic services
that have creative content, economic value and market orientation
• Intersect the artisan, services and industrial sectors.
The contemporary creative economy cuts across the arts,
culture, industry, business and technology.

6. Creative Industries
Source: “Creative Economy Report 2010.” UNDP and UNCTAD. 2010.

7. Creative Industries
Creative and innovative economies provide a country with an
edge in economic development and competitiveness. Creative
Industries, if properly nourished, protected and cultivated,
could endow Jordan with a powerful
Competitive Advantage

8. Economic Output and Global Creativity Index
Source: Florida, Richard. “Greater Competitiveness Does Not Have to Mean Greater Inequality”. 11 Oct 2011.
http://www.theatlanticcities.com/jobs-and-economy/2011/10/greater-competitiveness-does-not-greater-inequality/230/

9. The challenge of building an operational model
of the Creative Economy

10. Encouraging Innovation
Innovation: The implementation of a better, superior set of
solutions that satisfies growing market needs/requirements.
Comes in these forms:
• Making additional changes to existing products (greater
competition)
• Introducing new products (new segments)
• Developing a product in a way that changes doing business
or production
Four C’s, in a single country or different markets:
Cost, Convenience, Caliber, Creative destruction

11. Competitiveness Ranking
Major Indicators
Rank
2008-2009 2009-2010 2010-2011 2011-2012 2012-2013 2013-2014
(134
Countries)
(133
Countries)
(139
Countries)
(142
Countries)
(144
Countries)
(148
Countries)
Basic Requirement 47 46 57 61 66 76
Institutions 27 25 41 45 42 38
Infrastructure 44 42 61 59 60 54
Macroeconomic Environment 111 105 103 97 112 138
Health and Basic Education 56 57 65 72 56 65
Efficiency Enhancers 63 66 73 78 70 70
Higher Education and Training 42 42 57 59 55 56
Market Efficiency 44 43 46 54 44 39
Labor Market Efficiency 93 106 112 107 101 101
Financial Market Development 48 52 54 65 65 79
Technological Readiness 57 61 62 59 69 70
Market Size 88 82 84 88 84 87
Innovation & Sophistication Factors 47 51 65 70 52 51
Business Environment Development 47 49 66 68 55 47
Innovation 51 59 68 77 57 53
Source: World Economic Forum, Global Competitiveness report 2008-2013, http://www.weforum.org

12. Innovation Index Ranking
Major Indicators
2009
(130 countries)
2010
(132 Countries)
2011
(125 Countries)
2012
(141 countries)
2013
(142 Countries)
Overall ranking 55 58 41 56 61
Institutions 35 43 62 57 59
Human Capital & Research 55 31 50 49 53
Infrastructure 58 60 96 97 90
Market Sophistications 61 82 44 85 65
Business Sophistications 41 57 77 116 47
Knowledge & Technology
57 89 77 83 75
Outputs
Creative Outputs - 76 10 24 59
Source: Global Innovation Report, 2009-2013, www.globalinnovationindex.org

13. Doing Business Report Ranking
Major Indicators 2008 2009 2010 2011 2012 2013
Ease of Doing Business 80 101 100 111 96 106
Starting a Business 133 119 125 127 95 103
Dealing with Construction
71 116 92 92 93 102
Permits
Employing Workers 45 48 51 N/A 36 38
Registering Property 109 105 106 106 101 102
Getting Credit 84 125 127 128 150 167
Protecting Investors 107 114 119 120 122 128
Paying Taxes 19 22 26 29 21 35
Trading Across Borders 59 77 71 77 58 52
Enforcing Contracts 128 129 124 129 130 129
Closing a Business 87 96 96 98 104 112
Participating Countries 178 181 183 183 183 185
Source: Doing Business Report, 2011, World Bank Group

14. Economic Freedom
Source: Economic Freedom of the World, Annual report 2012
Year
Summary
Rating & Rank
Gov. Size
Legal Structure
& Security of
Property Rights
Sound Money
Freedom to
Trade
Internationally
Regulation
2000 34 68 38 7 62 43
2005 26 53 42 37 40 25
2006 45 97 47 44 26 35
2007 33 83 44 41 25 32
2008 40 87 35 58 22 24
2009 50 104 41 36 44 54
2010 20 14 49 43 44 37
2011 16 9 47 46 39 36

15. 15
Mapping Creativeity Competitiveness
Factor
Conditions
Strategy, Structure
&
Rivalry
Demand
Conditions
Clusters &
Clustering
Government

16. Demand Conditions
• A slight majority of demand originates locally
• In all industries, the majority of demand is patterned except for Books
and Press in which half of the demand is patterned
• Cyclical demand is the prevalent type of demand in all the industries except
in Performance and Celebration
• Price is the main factor affecting demand in all the industries except in
Performance and Celebration in which trends is the main factor
• Quality is the driving factor in the pricing of creative services and products
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17. Demand Conditions
• Customers are not adequately knowledgeable of industry
trends
• The Arab Awakening has increased demand
• Jordan is capable of handling increased demand
• The Arab Awakening has changed the work culture and
environment
• The nature of the creative content has changed with the
advent of the Arab Awakening
• The quality and sophistication of the creative content has
increased
17

18. Factor Conditions
• Equipment is new, yet lacking in sophistication
• Focus is mainly on a few small projects
• Projects are small in size and scope
• A majority views the global market as open to their activities
• Global connectivity is high
• Regional markets are open
• However, connectivity to global markets is higher than
connectivity to regional markets
• Medium to low availability of quality human resources
• Medium availability of technology
18

19. Factor Conditions
• ICT usage penetration is limited by high computer prices and
mobile tariffs in relation to average income
• Internet penetration is only at 38%
– Internet penetration in Qatar and the UAE is at 81% and 77%
respectively
• Low levels of e-commerce
– Mainly due to SMEs, especially small family run businesses, not
utilizing IT
• Knowledge content of ICT applications is unsophisticated (a
by-product of the lack of sophisticated demand)

20. Factor Conditions
• Jordan possesses a significant entrepreneurial class
• Poor technology and science basis
• Low investment in R&D
– Equates to 0.3% of GDP
• R&D is conducted by 10 public universities, 12 private universities,
and 12 scientific centers
• R&D governance is split between the Ministry of Higher Education
and the Higher Council for Scientific Research
• Jordan possesses a strong human capital base, but institutional
weaknesses are constraints on investors
• The human capital base includes:
– Substantial high skilled diaspora
– Large numbers of engineers
– IT proficient younger generation

21. Clusters and Clustering
Clusters
• Governments must invent various ways to encourage firms and
individuals to utilize innovation in ways that creates economic
growth in the country. A lot of which can be implemented by
“Clusters”
• Clusters focus on improving productivity in both emerging and
advanced economies
Examples: Silicon Valley, Boston’s Route 128, Taiwan’s Hsinchu
Park, South Korea’s Daedeok Science Town are all

22. Clusters and Clustering
Clusters proved successful in various economies:
• The achievements of Silicon Valley are more of a function of a unique
culture than a government policy.
• South Korea, and Taiwan government’s interventions, like planning and
subsidies and state ownership aren’t found in many countries.
• Though the government role in innovation is very important, there is
evidence in the various innovation successes some succeeded w/o state
backing or a uniquely creative business culture. Our own Samih Toukan
and Hussam Khoury, who created Maktoob, combined Jordan’s
comparative advantage in creative talent and low cost with the quality and
convenience of Dubai’s infrastructure and business networks.

23. Clusters & Clustering
• In all industries except in the Audio-Visual and Interactive Media, less than
15% of the stakeholders have agreements in place with supporting
industries
• Between 31%-44% of stakeholders in all industries utilize services and
products from supporting industries
• Those stakeholders using products and services from supporting
industries, use them frequently
• Supporting industries are reliable
• Relationships with suppliers from other industries are long term
• The large majority of relationships are project based
• Suppliers are relatively reliable in terms of quality consistency
• The majority of suppliers are local
23

24. Clusters & Clustering
• R&D institutions are too isolated to satisfy
productive needs of the economy
• University-industry collaboration in Jordan is
low
– Scored as 35.8 (from 10-70 scale) in the Global
Innovation Index
– Tunisia scored 51.8, while Morocco scored 34.9

25. Research and Development (R&D)
R&D: Certain activities that a business chooses to conduct with the intention
of making a discovery that can either lead to the development of new
products or procedures, or to improve an existing product or procedures.
Global R&D spending grew at an average annual rate of 7% Between 1999
and 2009, accelerating to 8% during the last five years.
During the entire period, R&D spending grew significantly faster than global
output, reflecting both increasing government support and a rising share of
technology-intensive industries in global production and trade

26. Global R&D
About R&D Spending
• Within Asia, R&D spending in China grew at an astounding 20% annual pace.
Spending on R&D also grew rapidly – about 10% annually – in South Korea.
• The US is the leader country in R&D investment, in 2009 the US spent an estimated
$400 billion, higher than China, Japan, and Germany combined.
• R&D spending grew by 4% in Japan, 5% in the US, and roughly 6% in Europe.
• The business sector is the predominant performer and funder of R&D investment.
In 2009, business accounted for 75% of R&D funding in Japan, 73% in South Korea,
72% in China, 67% in Germany, and 60% in the US.
• Multinational companies, whether headquartered in the US or elsewhere,
accounted for about 84% of private (non-bank) R&D investment in the US in 2009,
about the same as a decade earlier. And US multinationals still locate about 84% of
their R&D activities in the US, often in innovation clusters around research
universities.

27. Government
• The majority say there are no policy restrictions on new entry
• The government is not responsive to stakeholders’ needs
• Government agreements with other countries do slightly harm
stakeholders
• Monopolistic practices are apparent and harm businesses
• It is difficult to find both local and regional investors
• The regulator limits the growth of companies
• Customs are very high and higher than those of surrounding
countries
• Government legislation and procedures do not help exports
reach their potential
• Intellectual property rights are not protected
• Problems faced with regard to IPR are not being solved
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28. Government
• Jordan fails to attract high value added FDI
– Small market size
– Instability of the region
– Weak and inefficient institutional environment
– Government bureaucracy
• FDI inflows are mainly in low value added and no-tradable
sectors
– Construction
– Textiles
– Basic Minerals
• This led to 55% of jobs created in the private sector in 2000-
2010 going to foreign workers

29. Government: Role of Prizes
Examples:
In 1714, 7 years after one of the worst naval accidents in the history of Britain’s Royal
Navy, the UK launched the Longitude Prize, a £20,000 reward (US$5 million today) for
developing a simple and practical method to determine a Ship’s Longitude reliably.
In 1795, the French gov. with an army debilitated more by hunger than enemies,
offered prizes to develop an effective food-preservation method. After experimenting
for 15 years, Nicolas Appert won the prize with his ground breaking technique for
Preserving Food in Glass Jars. Later, England’s Peter Durand built upon Appert’s
method by using Metal Cans.
In 2008 the UAE created the “Zayed Future Energy Prize”. An annual award for
achievement in developing and Deploying Renewable Energy And Sustainable
Technologies. Since its launch, nearly $10 million has been awarded for innovations
that have changed the lives of people worldwide.

30. Strategy, Structure, & Rivalry
• The main competitors to Jordan are Lebanon, United Arab
Emirates (UAE) and Egypt
• Price is the most important factor in being competitive with
regional competitors
• The majority of stakeholders are not members of professional
associations
• Stakeholders receive minimal support from professional
associations
• Information on industry trends is widely accessible
• Insufficient finance and limited markets are the main factors
affecting demand
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31. What to do?
• Create a Comprehensive Policy on Creativity and Innovation
• Promote Industry and Academic Linkages
• Promote R&D.
• Provide Tax Credits for R&D
• Ease Credit Availability
• Promote an Entrepreneurial, Innovative Environment: Increased government
support for incubators, coordinate among them, develop entrepreneurship as an
academic subject, invest in science and technology education, encourage risk taking,
develop an ‘entrepreneurship cluster zone’, greater number of venture capital funds,
support value chains and cluster units
• Utilize ICT Capabilities: Provide access to international databases, develop
‘entrepreneur cafes’, create centers of R&D, connect the nation’s SMEs.
• Increase Government Spending and Funds: divert some foreign aid to R&D activities,
promote partnerships between foreign firms and Jordanian firms, in terms of R&D,
invest in new products or services to be jointly produced by foreign and Jordanian
firms, Establish an investment fund, to be paid for with funds from the private sector,
offer loans for R&D purposes from the public sector at low interest, government
could take the 1% tax it levies on shareholding companies, for R&D purposes, and
invest it in more applied research

32. Thank you