Competitiveness: Creating a Rwandan Economic Strategy Files... · Congo Uganda Singapore ($39,356) South Korea ($23,094) Cameroon African countries Asian countries East African Community

1GCR South Africa 062007.ppt

Copyright © 2007 Professor Michael E. Porter

This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “Building the Microeconomic Foundations of Competitiveness,” in The Global Competitiveness Report 2006 (World Economic Forum, 2006), “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998), and ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter.Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.eduVersion: July 20, 2008

Competitiveness: Creating a Rwandan Economic Strategy

Professor Michael E. PorterInstitute for Strategy and Competitiveness

Harvard Business School

Kigali, RwandaJuly 2008

2 Copyright 2008 © , M. PorterEast African Business Summit – final.ppt

$0

$3,000

$6,000

$9,000

$12,000

$15,000

-6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0%

PPP-adjusted GDP per Capita, 2007 ($USD)

Growth of Real GDP per Capita (PPP-adjusted), CAGR, 1998-2007Note: highlighted countries are part of the East African Community (EAC). Source: EIU (2008), authors calculations

Swaziland China

Vietnam

South Africa

Angola

Tanzania

Papua New GuineaLesotho Philippines India

Indonesia

Eritrea

Thailand

Namibia

Sri Lanka

TogoZimbabwe

Gabon

Mozambique

Cote d’Ivoire

Burundi

Guinea

Ethiopia Burma

Senegal

Botswana

Kenya Cambodia

Mauritius

Malaysia

LaosNigeriaPakistan

Malawi Rwanda

Congo

Uganda

Singapore ($39,356) South Korea ($23,094)

Cameroon

African countriesAsian countriesEast African Community

Prosperity PerformanceEast Africa versus Other Developing Countries

3 Copyright 2008 © Professor Michael E. PorterCompetitiveness Master - 2008-05-22.ppt

-15%

-10%

-5%

0%

5%

10%

15%

20%

25%

30%

1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

ANGOLAETHIOPIASUDANCHADMOZAMBIQUENIGERIAUGANDAKENYAMALAWIZAMBIAGHANALIBYABOTSWANARWANDAMADAGASCARTHE GAMBIACONGO (Dem Rep.)SOUTH AFRICANAMIBIABURKINA FASOSENEGALMACEDONIAALGERIABENINMOROCCOBURUNDICAMEROONGABONTOGOGUINEACOTE D'IVOIREZIMBABWE

Comparative Economic PerformanceReal GDP Growth Rates

Source: EIU (2007)

Countries sorted by 2003-2007 annual real GDP growth rate (CAGR)

Annual growth rateof real GDP (US$

2005 prices)

4 Copyright 2008 © , M. Porter

Rwanda Competitiveness in 2008

• Rwanda continues to be on a positive track for continuing growth and improvements in prosperity levels

• The economic gains are a reflection of the policy reforms undertaken as well as the bouncing back from low current levels of GDP

• Rwanda has also weathered the impact of political disturbances in Kenya, a weakening global economy, and continued political tensions with individual European countries

• Despite these achievements, Rwanda will need further efforts to realize the ambitious goals of its longer-term economic strategy

• Key areas for action are– Better alignment of government and donor activities with core

competitiveness needs of the Rwandan economy– Better coordination across different areas of policy– Stronger focus on the barriers for private sector development in

physical infrastructure and government rules and regulations


What is Competitiveness?

• Nations compete to offer the most productive environment for business

• The public and private sectors play different but interrelated roles in creating a productive economy

• Competitiveness depends on the productivity with which a nation uses its human, capital, and natural resources.

– Productivity sets the sustainable standard of living (wages, returns on capital, returns on natural resources) that a country can sustain

– It is not what industries a nation competes in that matters for prosperity, but howproductively it competes in those industries

– Productivity in a national economy arises from a combination of domestic and foreign firms

– The productivity of “local” or domestic industries is fundamental to competitiveness, not just that of export industries


Sources of Prosperity

Inherited ProsperityInherited Prosperity

• Prosperity is derived from selling or exploiting inherited natural resources

• Prosperity is constrained

• Government is the central actor in the economy as the owner and distributor of resource wealth– Resource revenues allow

unproductive policies and practices to persist

• Government’s role gravitates towards the distribution of wealth as interest groups seek a bigger share of the pie

• Prosperity is derived from selling or exploiting inherited natural resources

• Prosperity is constrained

• Government is the central actor in the economy as the owner and distributor of resource wealth– Resource revenues allow

unproductive policies and practices to persist

• Government’s role gravitates towards the distribution of wealth as interest groups seek a bigger share of the pie

Created ProsperityCreated Prosperity

• Prosperity is derived from creating more and more valuable products and services with rising efficiency

• Prosperity is unlimited

• Companies are the central actors in the economy

– Prosperity can only be created byfirms

• Government’s role is to create the enabling conditions for productivityand foster private sector development

• Prosperity is derived from creating more and more valuable products and services with rising efficiency

• Prosperity is unlimited

• Companies are the central actors in the economy

– Prosperity can only be created byfirms

• Government’s role is to create the enabling conditions for productivityand foster private sector development


Decomposing Prosperity

Per Capita IncomePer Capita IncomePer Capita Income

Labor Productivity

Labor Productivity

Labor Utilization

Labor Utilization

Domestic Purchasing

Power

Domestic Purchasing

Power• Local prices

– Efficiency of local industries

– Level of local market competition

• Consumption taxes

ProsperityProsperityProsperity

• Skills• Capital stock• Total factor productivity

• Standard of living• Inequality

• Workforce participation rate– Population age profile

• Unemployment• Working hours


0

250

500

750

1000

1250

1500

1750

2000

2250

1980 1985 1990 1995 2000 2005

Cote d'Ivoire

Ghana

Kenya

Madagascar

Mali

Nigeria

Rwanda

Senegal

Tanzania

Uganda

Zambia

GDP per person employed (constant

1990 PPP $)

Labor ProductivitySelected Countries

Source: World Bank Development Indicators (2008)


Decomposition of Rwandan Prosperity Growth

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

1980-1989 1995-2003

Total Factor Productivity

Capital

Labor

Growth Rate

Source: World Bank (2007)


Rwandan Export Share Trends

0.000%

0.001%

0.002%

0.003%

0.004%

0.005%

0.006%

0.007%

0.008%

1996 1998 2000 2002 2004 2006

Processed GoodsSemi-processed GoodsUnprocessed GoodsServicesTOTAL

Source: UNComtrade (2008)

World Export Market Share (current USD)


0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

-30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20%

Export SharesSelected Countries

Exports as Share of GDP (in %, 2007)

Change of Exports as Share of GDP, 2003 to 2007

Source: UN Comtrade (2007), authors’ analysis

African countriesAsian countriesEast African CommunitySwaziland

China

South Africa

Angola

Uganda

Philippines

BeninPakistan

Eritrea

Thailand

Namibia

Sri LankaTogo

Bangladesh

Mozambique

Cote d’Ivoire

Burundi

Guinea

Ethiopia

Burma

SenegalKenya

Cambodia

Mauritius

Malaysia

Laos

Nigeria

India

Malawi

Rwanda

Congo

Tanzania

Cameroon

Chad

Gabon

Zambia

Gambia

Japan

TunisiaKorea

Ghana

Sudan

Vietnam

Indonesia

Botswana

Lesotho

Papua New Guinea


0%

10%

20%

30%

40%

50%

60%

70%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Inbound Foreign Investment PerformanceSelected Countries

Source: UNCTAD, World Investment Report (2007)

Inward FDI Stocks as % of GDP, Average 2002 -

2006

FDI Inflows as % of Gross Fixed Capital Formation, Average 2002 - 2006

Japan

Philippines

Vietnam

Kazakhstan

Mongolia

Azerbaijan (116.4%, 48.5%)

New Zealand

IndonesiaIndia

PakistanKorea

Sri LankaTaiwan

Malaysia

Thailand

Burma Cambodia

Georgia

Tajikistan (70.4%)

Turkmenistan

Kyrgyz Republic

Ukraine

RussiaBrazilLaos

Belarus / Uzbekistan

China

Moldova

Armenia

Australia

Ghana

Rwanda

Kenya

Cote d’Ivoire

MaliGuinea

Togo

Central African Republic Burundi

Cameroon

Gabon

Ethiopia

Somalia

Tanzania

South Africa

Namibia

Botswana

Malawi

Congo

Nigeria (52.8%)

Guinea-Bissau

Tunisia

Egypt

African countriesOther countriesEast African Community

Uganda

13GCR South Africa 062007.ppt

Copyright © 2007 Professor Michael E. Porter

Inward Foreign Investment FlowsRwanda, 1970 - 2006

$0.0

$3.0

$6.0

$9.0

$12.0

$15.0

$18.0

$21.0

1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006Note: Data not available for 1994.Source: UNCTAD (2007)

Inward FDI (USD, millions)


0%

5%

10%

15%

20%

25%

30%

35%

40%

45%

-10% -5% 0% 5% 10% 15% 20% 25%

Gross Fixed Investment as % of GDP (2006)

Source: EIU, 2007.CAGR Gross Fixed Investment (as % of GDP), 2001 - 2006

Equatorial Guinea

Nigeria

ZambiaEthiopia

Tanzania

Morocco Togo

SudanBenin

Gambia

Kenya

RwandaBurundi

Senegal

Burkina FasoCameroon

AlgeriaNamibia

Gabon

Zimbabwe

Ghana

Tunisia

MadagascarUganda

Fixed Investment RatesSelected Countries

MozambiqueBotswana

Chad (-25.9%)Libya

GuineaCote d’Ivoire

Malawi

South Africa


International Aid and Assistance FlowsEast African Community, 2002 - 2006

0

1

1

2

2

3

3

4

4

5

Burundi Kenya Rwanda Tanzania Uganda

200120022003200420052006

Source: World Development Indicators (2008)

Aid as % Gross Capital

Formation


Macroeconomic Competitiveness

Microeconomic Competitiveness

Sophisticationof Company

Operations andStrategy

Quality of the NationalBusiness

Environment

MacroeconomicPolicies

SocialInfrastructure and PoliticalInstitutions

State of Cluster Development

• Macroeconomic competitiveness creates the potential for high productivity, but is not sufficient

• Productivity ultimately depends on improving the microeconomic capability of the economy and the sophistication of local competition

Determinants of Competitiveness

Endowments


Macroeconomic Competitiveness

• Basic human capacity– Education– Health

• Safety and security

• Political institutions

• Rule of law

• Fiscal policy

• Monetary policy

• Economic openness

Social Infrastructure and Political Institutions

Macroeconomic Policies


BOTSWANA

SOUTH AFRICANAMIBIA

GHANA

MOZAMBIQUE

SENEGALTANZANIA

ZAMBIAGAMBIAMALA

WIGABON

RWANDAUGANDA

NIGER

KENYACAMEROON

ETHIOPIA

ANGOLALIB

ERIACONGOBURUNDINIG

ERIAGUINEA

CENTRAL AFR. REP.CHAD

SUDAN

COTE D'IV

OIREZIM

BABWE

Voice and AccountabilityPolitical StabilityGovernment EffectivenessRegulatory QualityRule of LawControl of Corruption

Governance IndicatorsSelected Countries

Note: Sorted left to right by decreasing average value across all indicators. The ‘zero’ horizontal line corresponds to the median country’s average value across all indicators.Source: World Bank (2008)

Worstcountry in the world

Index of Governance

Quality,2006

Best country in the world


-30 -20 -10 0 10 20 30

Corruption Perception Index, 2007

Note: Ranks only countries available in both years (158 countries total) Source: Global Corruption Report, 2007

Change in Rank, Global Corruption Report, 2007 versus 2005

Rank in Global

CorruptionIndex,2007

158

1ImprovingDeteriorating

Highcorruption

Lowcorruption

Finland / New ZealandCanada

Bangladesh

Indonesia

Ireland

Greece

Egypt

Iceland

Czech Republic

Panama

Korea

India

Slovenia

Thailand

Switzerland

Swaziland

Turkey

Estonia

Austria Germany Japan

Vietnam

China

Norway

MalaysiaHungary

Spain

Costa Rica

ChileUnited States

South Africa

MexicoCroatia

Italy

Poland

Brazil

Argentina

Serbia

Haiti

Russia

Uruguay

Denmark

Botswana

Tunisia

Uganda

Senegal

Philippines

ZimbabweCote d’Ivoire

NigeriaPakistan

Tanzania

Jordan

Ukraine

Romania

UzbekistanCongo (Dem. Rep.)

Kenya

CameroonHonduras

Ecuador

El Salvador Ghana

Bolivia

Malta

NamibiaBahrain

Oman

AngolaEthiopia

BurundiNiger

Kazakhstan

MadagascarGabon Montenegro

Turkmenistan

ChadEquatorial Guinea

SudanSomalia

Congo LiberiaGambia

Iran

Belize

Rwanda

Sri Lanka

Saudi Arabia

Mozambique

ZambiaBenin

African countriesOther countriesEast African Community


Corruption Perception IndexEast African Countries

0

20

40

60

80

100

120

140

160

Tanzania Rwanda Uganda Burundi Kenya

2005 CPI Rank2006 CPI Rank2007 CPI Rank

Ranking (constant sample, 158 countries)

Note: Ranks only available starting in 2005 for all 5 countries Source: Global Corruption Report, 2007


0

20

40

60

80

100

120

140

160

Namibi

a

Madag

asca

rKen

ya

South

Africa

Tanza

niaAng

ola

Mozam

bique

Ugand

aSen

egal

Zambia

Rwanda

Maurita

niaTog

oMali

Botswan

aMala

wiNige

rNige

riaGha

naEthi

opia

Chad

Cote d'

Ivoire

Guinea

Camero

onGab

onZim

babw

e

Congo

, Rep

ublic

of

Centra

l Afric

an R

ep.

Burund

iOpenness to Trade

Selected African Countries, 2008Rank (157 countries)

Source: Index of Economic Freedom (2008), Heritage Foundation

Sub-Saharan Average: 112.2


Access to high quality business inputs

– Natural endowments– Human resources– Capital availability– Physical infrastructure– Administrative infrastructure

(e.g. registration, permitting)– Information infrastructure

(e.g., transparency)– Scientific and technological

infrastructure

Microeconomic Competitiveness: Quality of the Business Environment

Context for Firm

Strategy and Rivalry

Context for Firm

Strategy and Rivalry

Related and Supporting Industries


Factor(Input)

Conditions

Factor(Input)

ConditionsDemand

ConditionsDemand

Conditions

Availability of suppliers and supporting industries

Sophistication of local customers and needs

–Strict quality, safety, and environmental standards

• Many things matter for competitiveness• Successful economic development is a process of successive upgrading, in which the

business environment improves to enable increasingly sophisticated ways of competing

Local rules and incentives that encourage investment and productivity

– e.g. salaries, incentives for capital investments, intellectual property protection

Vigorous local competition– Openness to foreign and local

competition


0

20

40

60

80

100

120

140

160

180

Ease ofDoing

Business

EnforcingContracts

PayingTaxes

Starting aBusiness

EmployingWorkers

Dealingwith

Licenses

RegisteringProperty

GettingCredit

ProtectingInvestors

Closing aBusiness

TradingAcrossBorders

Ease of Doing BusinessRwanda, 2007

Ranking, 2007 (of 178 countries)

Source: World Bank Report, Doing Business (2008)

Favorable Unfavorable

Rwanda per capita GDP rank: 162

Median Ranking, Africa


Ease of Doing Business

Starting a Business

Dealing with Licenses

Employing Workers

Registering Property

Getting Credit

Protecting Investors

Paying Taxes

Trading Across Borders

Enforcing Contracts

Closing a Business

South Africa 35 53 45 91 76 26 9 61 134 85 68Namibia 43 101 31 33 128 36 64 48 144 33 47Botswana 51 99 122 70 36 26 107 14 145 95 26Kenya 72 112 9 66 114 13 83 154 148 107 76Ghana 87 138 140 138 26 115 33 75 61 51 96Ethiopia 102 106 58 89 147 97 107 29 150 77 70Nigeria 108 80 161 30 173 84 51 107 138 93 89Zambia 116 82 148 121 125 97 64 30 160 86 84Uganda 118 114 81 11 163 158 122 55 141 119 48Malawi 127 108 117 90 87 84 64 78 161 135 135Tanzania 130 95 170 151 160 115 83 104 100 35 109Gambia 131 94 70 29 133 135 165 173 73 61 116Mozambique 134 125 147 162 126 97 33 72 140 138 134Gabon 144 147 44 163 148 115 147 93 106 145 130Madagascar 149 61 139 150 165 176 51 86 126 151 178Rwanda 150 63 124 95 137 158 165 50 166 44 178Benin 151 137 123 115 105 115 147 161 124 166 106Zimbabwe 152 143 172 123 79 97 107 144 169 74 151Cameroon 154 160 154 120 134 115 107 166 132 172 92Togo 156 176 143 146 150 135 138 138 81 153 90Mauritania 157 167 142 117 52 115 141 171 152 89 143Mali 158 149 101 88 90 135 147 151 162 157 107Burkina Faso 161 105 169 152 170 115 138 133 170 109 91Senegal 162 159 64 160 155 135 158 164 136 148 73Guinea 166 171 158 99 151 135 165 163 102 127 111Angola 167 173 136 172 166 84 51 120 164 176 138Niger 169 153 155 161 63 135 147 115 163 132 133Chad 173 177 68 135 123 135 122 124 157 167 178Burundi 174 124 171 99 122 170 147 109 167 148 178Congo, Republic of 175 154 67 167 168 115 147 176 171 156 110Central African Rep. 177 139 133 149 95 115 122 175 172 169 178African Average 133.625 126.875 111.275 113.05 125.05 109.425 110.325 105.075 131.375 113 115.65

Doing BusinessSelected African Countries

Rank out of 178 countries. East African countries highlighted. Source: World Bank Doing Business (2008).


Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden

HotelsHotels

Attractions andActivities

e.g., theme parks, casinos, sports

Attractions andActivities

e.g., theme parks, casinos, sports

Airlines, Cruise Ships

Airlines, Cruise Ships

Travel agentsTravel agents Tour operatorsTour operators

RestaurantsRestaurants

PropertyServicesPropertyServices

MaintenanceServices

MaintenanceServices

Government agenciese.g. Australian Tourism Commission,

Great Barrier Reef Authority

Government agenciese.g. Australian Tourism Commission,

Great Barrier Reef Authority

Educational Institutionse.g. James Cook University,

Cairns College of TAFE

Educational Institutionse.g. James Cook University,

Cairns College of TAFE

Industry Groupse.g. Queensland Tourism

Industry Council

Industry Groupse.g. Queensland Tourism

Industry Council

FoodSuppliers

FoodSuppliers

Public Relations & Market Research

Services

Public Relations & Market Research

Services

Local retail, health care, andother services

Local retail, health care, andother services

Souvenirs, Duty Free

Souvenirs, Duty Free

Banks,Foreign

Exchange

Banks,Foreign

Exchange

Local Transportation

Local Transportation

Microeconomic Competitiveness: State of Cluster DevelopmentTourism Cluster in Cairns, Australia


Institutions for CollaborationSelected Massachusetts Organizations, Life Sciences

Industry / Cluster AssociationsIndustry / Cluster Associations

Massachusetts Biotechnology CouncilMassachusetts Medical Device Industry CouncilMassachusetts Hospital Association

Massachusetts Biotechnology CouncilMassachusetts Medical Device Industry CouncilMassachusetts Hospital Association

Broader Business AssociationsBroader Business Associations

Associated Industries of MassachusettsGreater Boston Chamber of CommerceHigh Tech Council of Massachusetts

Associated Industries of MassachusettsGreater Boston Chamber of CommerceHigh Tech Council of Massachusetts

University – Company InitiativesUniversity – Company Initiatives

Harvard Biomedical CommunityMIT Enterprise ForumBiotech Club at Harvard Medical SchoolTechnology Transfer offices

Harvard Biomedical CommunityMIT Enterprise ForumBiotech Club at Harvard Medical SchoolTechnology Transfer offices

Informal networksInformal networks

Company alumni groupsVenture capital communityUniversity alumni groups

Company alumni groupsVenture capital communityUniversity alumni groups

Joint Research InitiativesJoint Research Initiatives

New England Healthcare InstituteWhitehead Institute For Biomedical ResearchCenter for Integration of Medicine and Innovative Technology (CIMIT)

New England Healthcare InstituteWhitehead Institute For Biomedical ResearchCenter for Integration of Medicine and Innovative Technology (CIMIT)

Kenya’s Cut Flower Cluster


Sources: Student team research by Kusi Hornberger, Nick Ndiritu, Lalo Ponce-Brito, Melesse Tashu, and Tijan Watt, Microeconomics of Competitiveness Course, 2007


$0

$50,000

$100,000

$150,000

$200,000

$250,000

$300,000

$350,000

1990 1992 1994 1996 1998 2000 2002 2004 20060.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

5.0%

ValueMarket Share

The Kenyan Cut Flower ClusterTrade Performance

Kenyan Cut FlowerExports in thousand US $

Kenyan Cut FlowerWorld Export Market Share

Source: International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database.


• Competitiveness requires that local companies upgrade the quality of the value chain

Microeconomic Competitiveness: Company Sophistication

SupportActivities

Marketing& Sales

(e.g. Sales Force,

Promotion, Advertising,

Proposal Writing, Web

site)

InboundLogistics

(e.g. Incoming Material

Storage, Data Collection,

Service, Customer Access)

Operations

(e.g. Assembly, Component Fabrication,

Branch Operations)

OutboundLogistics

(e.g. Order Processing,

Warehousing, Report

Preparation)

After-Sales Service

(e.g. Installation, Customer Support,

Complaint Resolution,

Repair)

Ma

rg

in

Primary Activities

Firm Infrastructure(e.g. Financing, Planning, Investor Relations)

Procurement(e.g. Components, Machinery, Advertising, Services)

Technology Development(e.g. Product Design, Testing, Process Design, Material Research, Market Research)

Human Resource Management(e.g. Recruiting, Training, Compensation System)

Value

What buyers are willing to pay


Company Sophistication: Measures from the Global Competitiveness Report

Strategy and operational effectiveness• Nature of competitive advantage• Production process sophistication• Degree of customer orientation• Extent of marketing• Value chain breadth• Company spending on research

and development• Capacity for innovation

Internationalization of Firms• Extent of regional sales• Breadth of international markets• Control of international distribution• Prevalence of foreign technology

licensing

Organizational Practices• Reliance on professional management• Willingness to delegate authority• Extent of staff training• Performance-based compensation


The Process of Economic DevelopmentShifting Roles and Responsibilities

Old ModelOld Model

• Government drives economic development through policy decisions and incentives

• Government drives economic development through policy decisions and incentives

New ModelNew Model

• Economic development is a collaborative process involving government at multiple levels, companies, teaching and research institutions, and private sector organizations

• Economic development is a collaborative process involving government at multiple levels, companies, teaching and research institutions, and private sector organizations

• Competitiveness must become a bottom-up process in which many individuals, companies, and institutions take responsibility

• Every community and cluster can take steps to enhance competitiveness

• The private sector must become more engaged in competitiveness to improve rapidly


Clusters and Economic Policy

ClustersClusters

Physical Infrastructure

Natural Resource Protection

Environmental Stewardship

Science and TechnologyInvestments (e.g., centers, university departments, technology transfer)

Education and Workforce Training

Business Attraction

Export Promotion

• Clusters provide a framework for implementing public policy and organizing public-private collaboration to enhance competitiveness

Standard setting and quality initiatives

Market Information and Disclosure

Management Training


Role of the Private Sector in Economic Development

• A company’s competitive advantage depends partly on the quality of the business environment

• A company gains advantages from being part of a cluster• Companies have a strong role to play in upgrading their business environment

• Take an active role in upgrading the local infrastructure• Nurture local suppliers and attract foreign suppliers • Work closely with local educational and research institutions, to upgrade

their quality and create specialized programs addressing the cluster’s needs

• Inform government on regulatory issues and constraints bearing on cluster development

• Focus corporate philanthropy on enhancing the local business environment

• An important role for trade associations– Greater influence if many companies are united– Cost sharing between members


Geographic Influences on Competitiveness

Broad Economic AreasBroad Economic Areas

Groups of Neighboring Nations


States, ProvincesStates, Provinces

Metropolitan AreasMetropolitan Areas

NationNation

World EconomyWorld Economy

Rural AreasRural Areas

Sub-National Economies


$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

0.0% 0.5% 1.0% 1.5% 2.0% 2.5% 3.0% 3.5%

Regional Economic PerformanceU.S. States

Note: Southern states as defined by the U.S. census highlighted in blue. All figures in chained 2000 dollars.Source: BEA, 2007

Real Gross State Product per Capita, 2006

Change in Real Gross State Product per Capita, CAGR, 1997-2006

New Jersey

Illinois

GeorgiaMichigan

U.S. average

U.S. average

Massachusetts

Idaho

North Dakota (4.1%)

Alaska

Delaware

New York

Louisiana

Wyoming

MississippiWest Virginia

Connecticut

IowaVermont

Washington

Montana

Kentucky

Oregon

New Mexico

South Carolina

Colorado Minnesota

Texas

Virginia

Maryland

Alabama

Florida

ArkansasOklahoma

North Carolina

TN

California

Hawaii

OhioMissouri

Utah

Nebraska

Arizona

SD

Maine

New Hampshire

KansasPA

NV

WisconsinIN

Rhode Island


Rwandan Provinces


Specialization of Regional EconomiesSelected U.S. Geographic Areas

BostonAnalytical InstrumentsEducation and Knowledge CreationCommunications Equipment

BostonAnalytical InstrumentsEducation and Knowledge CreationCommunications Equipment

Los Angeles AreaApparelBuilding Fixtures,

Equipment and Services

Entertainment

Los Angeles AreaApparelBuilding Fixtures,

Equipment and Services

Entertainment

ChicagoCommunications EquipmentProcessed FoodHeavy Machinery

ChicagoCommunications EquipmentProcessed FoodHeavy Machinery

Denver, COLeather and Sporting GoodsOil and GasAerospace Vehicles and Defense

Denver, COLeather and Sporting GoodsOil and GasAerospace Vehicles and Defense

San DiegoLeather and Sporting GoodsPower GenerationEducation and Knowledge Creation

San DiegoLeather and Sporting GoodsPower GenerationEducation and Knowledge Creation

San Francisco-Oakland-San Jose Bay AreaCommunications EquipmentAgricultural ProductsInformation Technology

San Francisco-Oakland-San Jose Bay AreaCommunications EquipmentAgricultural ProductsInformation Technology

Seattle-Bellevue-Everett, WAAerospace Vehicles and DefenseFishing and Fishing ProductsAnalytical Instruments

Seattle-Bellevue-Everett, WAAerospace Vehicles and DefenseFishing and Fishing ProductsAnalytical Instruments

HoustonOil and Gas Products and ServicesChemical ProductsHeavy Construction Services

HoustonOil and Gas Products and ServicesChemical ProductsHeavy Construction Services

Pittsburgh, PAConstruction MaterialsMetal ManufacturingEducation and Knowledge

Creation

Pittsburgh, PAConstruction MaterialsMetal ManufacturingEducation and Knowledge

Creation

Atlanta, GAConstruction MaterialsTransportation and LogisticsBusiness Services

Atlanta, GAConstruction MaterialsTransportation and LogisticsBusiness Services

Raleigh-Durham, NCCommunications EquipmentInformation TechnologyEducation andKnowledge Creation

Raleigh-Durham, NCCommunications EquipmentInformation TechnologyEducation andKnowledge Creation

Wichita, KSAerospace Vehicles and

DefenseHeavy MachineryOil and Gas

Wichita, KSAerospace Vehicles and

DefenseHeavy MachineryOil and Gas

Note: Clusters listed are the three highest ranking clusters in terms of share of national employment.Source: Cluster Mapping Project, Institute for Strategy and Competitiveness, Harvard Business School, 11/2006.


Geographic Influences on Competitiveness

Broad Economic AreasBroad Economic Areas



States, ProvincesStates, Provinces

Metropolitan AreasMetropolitan Areas

NationNation

World EconomyWorld Economy

Rural AreasRural Areas

The Neighborhood


The NeighborhoodEast Africa

Source: Google Maps

• Economic coordination among neighboring countries can significantly enhance competitiveness• Integration with neighbors offers greater opportunities than participation in broader economic forums


Regional Economic Strategy• Defining a strategic role for the region in the continent and the world

economy• Opening internal trade and investment• Achieving synergies in enhancing the business environment• Facilitating cross-border cluster development• Enhancing company capabilities and non-traditional exports

• Raising productivity• Increasing the attractiveness of the region as a whole for foreign

investment• Winning greater support from the international community• Accelerating economic policy at the national level

But

• Cross-national collaboration is not a substitute for national microeconomic reforms


• Eliminating trade and investment barriers within the region

• Simplifying and harmonizing cross-borderregulations and paperwork

• Coordinatinganti-monopoly and fair competition policies

• Harmonizing environmental standards

• Harmonizing product safetystandards

• Establishing reciprocal consumerprotection laws

• Opening governmentprocurementwithin the region

• Improving regional transportationinfrastructure

• Creating an efficient energynetwork

• Enhancing regional communicationsand connectivity

• Linking financialmarkets

• Opening the movement of students for higher education

• Harmonizing administrative requirements for businesses

• Facilitating cross-bordercluster upgrading, e.g.

– Tourism

– Agribusiness

– Transport & Logistics

– Business services

• Creating a regional strategy and marketing program

• Sharing bestpractices in government operations

• Creating regional institutions

– Dispute resolution mechanisms

– Regional development bank

• Developing a regional position with international organizations

Factor (Input)

Conditions

Factor Factor (Input)(Input)

ConditionsConditions

Regional Strategy & Governance

Regional Strategy & Governance

Context for Strategy

and Rivalry

Context for Context for Strategy Strategy

and Rivalryand Rivalry



Demand ConditionsDemand Demand

ConditionsConditions

Economic Coordination Among NeighborsCapturing Synergies

Macro-economic

Competitiveness

Macro-economic

Competitiveness

• Coordinating programs to improve publicsafety

• Coordinating macro-economicpolicies


Roads

AirportsPorts

Logistic Corridor

Strategy for Cross-National RegionsCentral American Logistical Corridor

Mexico

Belize

Honduras

El SalvadorNicaragua

Costa Rica Panama

Guatemala

Country Boundary


Regional Economic Strategy InitiativesSuccess Factors

• Common understanding of competitiveness

• Develop a regional value proposition = a strategy

• Emphasis microeconomic aspects of competitiveness, not just macro

• Focus on specific projects and initiatives

• Led by the private sector with the participation of all regional actors and representation from the national governments

• Institutionalized through formal enabling structures

• Measure and report progress

• Bottoms up, win-win projects, rather than grand political and macroeconomic declarations


National Value PropositionNational Value Proposition

Defining an Economic Strategy

Developing Unique StrengthsDeveloping Unique Strengths Achieving and Maintaining Parity with Peers

Achieving and Maintaining Parity with Peers

• What elements of macroeconomic competitiveness and the business environment are crucial priorities?

• What existing and emerging clustersshould be developed first?

• What weaknesses must be addressed to achieve parity with peer countries?

• What is the unique competitive position of the nation or region given its location, legacy, and existing and potential strengths?

– What roles with neighbors, the region, and the broader world?– What unique value as a business location?– For what types of activities and clusters?

• Priorities and sequencing are necessity in economic development


Some ImplicationsWhat is Unique about Rwanda?

Toward A Rwandan Economic Strategy

• Low corruption• Stable• Secure and safe• Clean• Responsive• Integrated economic and social

development• Unique climate and growing conditions• Central location on the African

continent• Established positions in tea, coffee,

tourism• Opportunity to lead the region in ICT

and services• Social innovator in health, education,

reconciliation, gender equality, and other areas

• Disproportionate external interest in the country

• Rwanda must maintain stability, safety, orderliness, and lack of corruption at all costs

• Rwanda must accelerate improvement of skills and business infrastructure, managerial skills, ease of doing business

• Kigali must become a vibrant capital city• Rwanda should seize the opportunity to

transform agriculture• Rwanda is unlikely to be competitive in

exporting bulky goods with low value-to-weight

• Rwanda should develop air freightablegoods and services exports to nullify its logistical disadvantages– eg, silk, flowers

• Rwanda in inextricably linked with its neighbors

• A new model of African development


Rwanda’s Competitiveness Agenda

Business EnvironmentBusiness Environment

• Land use• Physical infrastructure

– Airport / air service– Connectivity– Economic zones

• Energy– Renewable

• Skills development• Build towns and increase urbanization

outside of Kigali• Institutional capacity building• Improve government efficiency and cross

agency coordination

Cluster DevelopmentCluster Development

• Activate a formal cluster development program led by the private sector

• Established clusters– Tea– Coffee– Tourism– Mining

• Emerging clusters– Logistics and transport– Construction and real estate– ICT services– Specialty agriculture (e.g., silk, flowers)– Health and other social services– Arts and culture (Hillywood)

Private SectorPrivate Sector

• Upgrade private sector capabilities• Engage the private sector in economic

development• Support cooperative private investment funds

to jumpstart the private equity market

NeighborhoodNeighborhood

• Lead economic integration with neighboring countries

– e.g., Road transportation efficiency– Railway development– Energy grid

Documents

Competitiveness: Creating a Rwandan Economic Strategy Files... · Congo Uganda Singapore ($39,356) South Korea ($23,094) Cameroon African countries Asian countries East African Community