Lessons on how to transform a vision into reality

Ricardo Hausmann

The bad practice of following “best practice”

• There is no such thing as a perfect suit. There are onlyperfectly tailored suits• There are no such things as best practices, only mostsuitable practices, given the context

•When you blindly follow best practices, as manybenchmarking exercises often encourage, you arebound to import solutions to problems you do nothave, while you let the problems you do have fester• Focus on defining problems and solving them, notdefining solutions and copying them

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Focus on problems, not benchmarks

•Many countries have tried to increase competitivenessby focusing on improving their ranking in the WEFGlobal Competitiveness Index or the WB DoingBusiness Index•Many have succeeded in improving their ranking in theIndex• Colombia, Mexico, Saudi Arabia, Morocco

• But not their growth or actual competitiveness• Because the Indexes do not really capture where theshoe hurts

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WhattheIndexesassume:

Low social conflict

Macro stability

Infrastructure

Human capital

Low taxes

Finance

What is the impact of a reform in a particular area?

Whatistheworldlike?Substitutesorcomplements?

Low social conflict

Macro stability

Infrastructure

Human capital

Low taxes

Finance

Low social conflict

Macro stability

Infrastructure

Hum

an capital

Low taxes

Finance

How to find out what to fix?

• Indexes allow the government to decide on prioritieswithout having to their own citizens and businessesabout what to fix• Disciplined interaction between government and firmscan help identify problems and solutions• Productivity councils by value chain• Japan: deliberation councils• Peru: Executive Boards

• Discuss productivity, not profitability5

We know that we don’t know, but at least we know that

• Countries often agree on goals and targets, which can be

useful, if done well

• That is what Oman 2040 is about

• But too often they think they know what they need to do

to achieve those targets

• They don’t! Nobody does!

• Improve learning in schools? Improve government effectiveness?

• But we need to find out by discovering what works in our

context

• If you know that you do not know, you know that you need

to find out

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Does action follow strategy or the other way around?

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Policy design

Strategy

ActionFeedback

Adap

tatio

nConsequences

Who are the agents of change in your strategy?

• Everybody wants to be the next Silicon Valley• But that is a very difficult ecosystem to create from scratch

• It is not how the US did it in the 20th Century

• The Bell Labs example• A private regulated monopoly

• Private conglomerates• Japan Keiretsus, Korean Chaebols, Turkish Conglomerates

• Foreign Direct Investment• Rockefeller in Venezuela

• Migration• Diasporas:

• South East Asia, Israel, Armenia

• The Entrepreneurial State• France 1945-1985, Israel 1948-1985, Mazuccato

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Should you focus on adding value to your raw materials?

• Not completely wrong, but mostly castrating• All production involves adding value to raw materials• But the raw materials don’t have to be yours

• All raw materials are as far away as the nearest port

• Two conditions must hold for favoring your raw materials• First, you must be talking about a product that requires mainly one raw material

• Few products are made with few inputs, so few places have them anyway• Which raw material is key to making cars, TVs or even pasta or chocolate?

• Second, it must be cheaper to transport the final product than the raw material• True for trees and wood but not for crude oil and gasoline

• The case of Finland• Add capabilities to your capabilities• You have many more options than just adding value to a few locally available rawmaterials

Your biggest headache may be your next comparative advantage

• Focus on finding solutions to you most important problems

• Say, water shortage

• If you find a solution, the situation in the country should

improve

• Drip irrigation, desalination

• But your are not the only country with that problem

• There are other dry regions in the world

• So your solutions may solve problems in other countries

• They can become your new export

• Other examples: educational quality

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The vision is not a promiseIt is a shared challenge and

a shared responsibilityThank you!

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