Werner Corrales-LealUNCTAD-Global Programme on

Globalization, Liberalization and Sustainable Human Development Marrakech, April 2004

ENERGY CLUSTERS AND SERVICES: A STRATEGY FOR DIVERSIFICATION AND SUSTAINABLE DEVELOPMENT IN OIL EXPORTING AFRICAN COUNTRIES

ENERGY CLUSTERS AND SERVICES: A STRATEGY FOR DIVERSIFICATION AND SUSTAINABLE DEVELOPMENT IN OIL EXPORTING AFRICAN COUNTRIES

AN APPROACH TO TRADE LIBERALIZATION AND WTO NEGOTIATIONS FROM AN OIL EXPORTING COUNTRY PERSPECTIVE

NOT AN OFFICIAL UNCTAD RECORD

LIST OF CONTENTSLIST OF CONTENTS

An approach for making trade integration supportive of development.

Market-friendly active policies for development: An illustrative case in the Venezuelan Oil Sector.

Appendix: Illustrations of the links between effectiveness of development strategies and WTO rules

PART ONEPART ONE

Trade-supported Development Strategies

An approach for making trade integration supportive of development

Specific impacts on the productive bases of developing countries Specific impacts on the productive bases of developing countries

• “Natural advantages”confirmed as bases for further specialization

• Most trade and FDI flows occur within TNC chains and networks

• External shocks: financial volatility, declining and unstable X prices

Impacts on inequalities, at international and country level Impacts on inequalities, at international and country level

• Destruction of traditional SMEs’ networks with no substitutes

• Precarious employment conditions become structural after Adjustment

SOME IMPACTS OF LIBERALISATION ON DEVELOPING ECONOMIES WORTH TO CONSIDERSOME IMPACTS OF LIBERALISATION ON DEVELOPING ECONOMIES WORTH TO CONSIDER

• 40% of K flows to arbitrage; high proportion of FDI does not generate X

• Success story of a few countries: Active policies for competitiveness

• 90% of K flows to twenty “emerging markets” (50% in the 80s)

• LDCs marginalisation; no sign of convergence; uneven “Welfare Gains”

• Net positive creation of trade; trade flows grow faster than GDP

An approach for making trade integration supportive of development

Objectives in the three spheres of Sustainable Development Objectives in the three spheres of Sustainable Development

GUIDELINES FOR A DEVELOPMENT-SUPPORTIVE INTEGRATION IN THE GLOBAL ECONOMYGUIDELINES FOR A DEVELOPMENT-SUPPORTIVE INTEGRATION IN THE GLOBAL ECONOMY

Macroeconomic and international finance orientations Macroeconomic and international finance orientations

• Equilibrium in international flows and limits to volatility of K

• Direct investment (N+F) oriented to increase productivity and PPE

Aims and strategic guidelines for trade-supported policies Aims and strategic guidelines for trade-supported policies

• Expansion of real incomes and opportunities of the citizens

• Sustainable use of natural resources for present and future generations

• Integration in global system securing long term, stable economic growth

An approach for making trade integration supportive of development

• Increase value added, knowledge intensity and differentiation to exports

• Enhance efficiency in production through technology and innovation

• Improve internal multipliers: clustering, linkages and SMEs networking

• Gain market access; improve marketing and trade defense capabilities

• Improve social effectiveness of economic policy (e.g. Informal sectors)

• Mainstream environmental concerns in competitiveness policies

• Basis and intensity of competition erodes capacities for reinvestment

Reduce dependency on current trade in commodities Reduce dependency on current trade in commodities

• Commodity production has very limited networking or spill-over effects

Promote effective tech transfer and increase internal multipliers Promote effective tech transfer and increase internal multipliers

THE NEED FOR ACTIVE POLICIES FOR DEVELOPMENT IN OIL-EXPORTING COUNTRIESTHE NEED FOR ACTIVE POLICIES FOR DEVELOPMENT IN OIL-EXPORTING COUNTRIES

• “Global Chain Optimisation”: Promote Clusters and insertion to Chains

• Motivate and promote domestic R&D and Technological Capacity Building

• A “Levelled playing field ” to negotiate alliances and complementarities

• Modify trends: extreme productivities and exchange rate appreciation

Modify dynamics of investment affected by the Dutch Disease Modify dynamics of investment affected by the Dutch Disease

• Incentivate Investment towards higher value added goods & services

An approach for making trade integration supportive of development

• Active policies affecting Static factors:

– Export growth based on market access – Rents related to productivity, based on “Best Global Practices”– Productive linkages and networking enhancing domestic multipliers

Impinge on factors explaining growth in revenues and competitiveness Impinge on factors explaining growth in revenues and competitiveness

• Active policies enhancing Dynamic factors ( Rents related to innovation ):

– Knowledge-enhanced productivity; Innovation in processes and attributes …– Strategic marketing; differentiation; life cycles of products..

• Effective market access: Ease traditional barriers and improve access to GVCs

Relieve constraints for “adding value” or appropriating trade surplus Relieve constraints for “adding value” or appropriating trade surplus

• Diversification: Move away from extreme competition in commodities

• Networks and institutions: Frameworks for learning and multiplying effects

• Negotiations in Policy Space: Level the playing field for Supply-side Policies

MANAGING TRADE INTEGRATION: AFFECT THE RATIONALE OF TRADE SURPLUS APPROPRIATION MANAGING TRADE INTEGRATION: AFFECT THE RATIONALE OF TRADE SURPLUS APPROPRIATION

An approach for making trade integration supportive of development

MANAGING TRADE INTEGRATION: RELEVANT POLICY AREAS AND ENABLING FRAMEWORKS

MANAGING TRADE INTEGRATION: RELEVANT POLICY AREAS AND ENABLING FRAMEWORKS

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MACROECONOMIC FRAMEWORK OF POLICIES

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NATIONAL NATIONAL ENABLINGENABLING

FRAMEWORKSFRAMEWORKS

ACTIVE AND ACTIVE AND REGULATORY REGULATORY

POLICIESPOLICIES(THE TOOL BOX)(THE TOOL BOX)

An approach for making trade integration supportive of development

COMPONENTS AND AIMS OF AN INTEGRATED TRADE-SUPPORTED DEVELOPMENT STRATEGYCOMPONENTS AND AIMS OF AN INTEGRATED TRADE-SUPPORTED DEVELOPMENT STRATEGY

KNOWLEDGE, INNOVATION SYSTEMS & TECHNOLOGY TRANSFER

POLICIES

ENTERPRISE DEVELOPMENT AND CLUSTERING, PRODUCTIVITY &

INVESTMENT POLICIES

POLICIES

AND RULE MAKING IN INTERNATIONAL TRADE AND

INTEGRATION

Trade-related policy areas Trade-related policy areas Strategic Policy Goals Strategic Policy Goals

Enhance social effectiveness of economic policy

Improve internal multipliers of export-led growth

Secure equilibrium and stability in in external flows

Environmental concerns as cross-cutting policy issues

Increase knowledge value & diversification in exports

Enhance market access and defense capabilities

Improve productivity through technology & innovation

An approach for making trade integration supportive of development

• Conditioned access to FDI, as “benefit” in sectors reserved for national investment

Market consistent investment-related policies for competitiveness Market consistent investment-related policies for competitiveness

• Focalized promotion; incentives to ToT, R&D, Clustering and SME development

• POE procurement promoting technological capacity building and SMEs clustering

SOME OPPORTUNITIES FOR SUPPLY-SIDE POLICIES CONSISTENT WITH CURRENT WTO RULESSOME OPPORTUNITIES FOR SUPPLY-SIDE POLICIES CONSISTENT WITH CURRENT WTO RULES

• Subsidies (dual pricing in gas); tariffs & tariff binding for value-added goods

Multilateral disciplines and issues involved in the immediate future Multilateral disciplines and issues involved in the immediate future

• Performance requirements for ToT, domestic capabilities development & clustering

• Energy services and GATS rules in general;

• Coordinated implementation of IPR , competition rules and R&D programmes

An approach for making trade integration supportive of development

• Special and Differential Treatment; “Spaces for Development Policies” in general

• Eventual negotiations on investment, public procurement and competition

LINKAGES IN THE TWO DIMENSIONS OF TRADE AND DEVELOPMENT POLICIESLINKAGES IN THE TWO DIMENSIONS OF TRADE AND DEVELOPMENT POLICIES

KNOWLEDGE, INNOVATION SYSTEMS & TECHNOLOGY TRANSFER

POLICIES

ENTERPRISE DEVELOPMENT, PRODUCTIVITY &

INVESTMENT POLICIES

NATIONAL POLICIES

FOR INTERNATIONAL TRADE AND INTEGRATION

DEMAND SIDE TRADE-

SUPPORTED POLICIES

SUPPLY SIDE TRADE-SUPPORTED

POLICIES

RULES IN THE SPACE FOR DEVELOPMENT

POLICIES

MARKET ACCESS AND FAIR TRADE

RULES

An approach for making trade integration supportive of development

PART TWOPART TWO

Market friendly policies for development: An illustrative case in the Venezuelan Oil Sector

• Only 15% of the engineering & capital goods procurement was national

Strategic need to reduce Technological Dependence on TNCs Strategic need to reduce Technological Dependence on TNCs

1980 : MAIN CHALLENGES IN THE SECTOR RELATED TO TECHNOLOGICAL CAPABILITIES1980 : MAIN CHALLENGES IN THE SECTOR RELATED TO TECHNOLOGICAL CAPABILITIES

• Almost inexistent R&D Capabilities in the sector (PDVSA or elsewhere)

Objective shortages in Technological Capabilities in the Country Objective shortages in Technological Capabilities in the Country

• Only 5 construction management firms capable of major assignments

• Decision to face the program on a “Market Friendly” basis

Doubts and confidence after only 5 years of the nationalization Doubts and confidence after only 5 years of the nationalization

• Firm commitment of PDVSA and the Venezuelan private sector

• Public doubts about the success of the Capacity Building Program

• Pre-existing contracts for the provision of technology and engineering

The use of Market-Friendly Active Policies, a case of the Oil Sector in VenezuelaThe use of Market-Friendly Active Policies, a case of the Oil Sector in Venezuela

• About 20 engineering companies for projects of medium complexity

• Establishment policy for Transfer of Technology on Commercial Basis

Creation of a High Quality Research & Development Organization Creation of a High Quality Research & Development Organization

• Massive program for training human resources in research fields

THE STRATEGY FOR CAPACITY BUILDING IN R&D, ENGINEERING AND CONSTRUCTION SERVICESTHE STRATEGY FOR CAPACITY BUILDING IN R&D, ENGINEERING AND CONSTRUCTION SERVICES

• Implementation of Quality Assurance and Competitiveness Programs

Promotion of Capital Goods Manufacturing and Service SMEs Promotion of Capital Goods Manufacturing and Service SMEs

• Export Promotion Program

• Reform of Contracting Practices introducing Project Disaggregation

Promotion of Engineering and Construction Management firms Promotion of Engineering and Construction Management firms

• Continuous Improvement and Quality Control Practices in all Contracts

• Non Mandatory Performance Requirements for Joint Ventures

• Creation and development of INTEVEP

The use of Market-Friendly Active Policies, a case of the Oil Sector in VenezuelaThe use of Market-Friendly Active Policies, a case of the Oil Sector in Venezuela

• Incentives for Chains of Suppliers Development Programs

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•trend

Investment US$ 2,500 MM/yr

• Very high improvement in Technological Capabilities

LONG TERM EVOLUTION OF THE ENGINEERING AND CONSTRUCTION SERVICES 1980 - 2000LONG TERM EVOLUTION OF THE ENGINEERING AND CONSTRUCTION SERVICES 1980 - 2000

The use of Market-Friendly Active Policies, a case of the Oil Sector in VenezuelaThe use of Market-Friendly Active Policies, a case of the Oil Sector in Venezuela

• Highly skilled jobs,sources of Added Value and backward links created

• Further evolution of Engineering & Construction to Integrated Services

PART FOURPART FOUR

Appendix: Illustrations of the links between effectiveness of development strategies and WTO rules

SUSTAINABLE DEVELOPMENT OBJECTIVES

SUSTAINABLE DEVELOPMENT OBJECTIVES

WTO FRAMEWORKOF RULES

WTO FRAMEWORKOF RULES

POLICY GOALS OF OIL EXPORTING COUNTRIESPOLICY GOALS OF OIL

EXPORTING COUNTRIES

Substantially alleviate poverty, exclusion and social polarization

Generalize access to health, nutrition and education

Support micro-enterprise & coops networks’ output growth & upgrade

Promote capabilities in HVA Energy Service Sectors

Support Investment in R&D and innovation-based firms in clusters

Support cost affordable ToT in social sectors and environment

Progressive and selective M liberalization in non-energy sectors

Temporary support to X capabilities of firms in non-energy sectors

Promotion of development goals-targeted FDI in energy-related sectors

Support consolidation of energy-based clusters of SMEs & big firms

Support managerial and techno upgrade of SMEs in energy clusters

Diversify production towards higher value added & knowledge

Reduce productivity gaps: Social groups, regions, sectors

Enhance domestic multipliers: jobs and income sources

Long term sustained, trade-supported economic growth

Enabling provisions in “Space for Development

Policies”

Traditional Commodity X: Strategic market power (OPEC)

Value-added X: Support marketing improvements; defend foreign mkts

Commodities X: Competition, Anti-

Dumping and Subsidies;

H. V. A. down-stream X: Non discrimination or

trade barriers

Support and actively enforce environmental adequacy of industries

ILLUSTRATION OF LINKS IN A TRADE-SUPPORTED STRATEGY FOR OIL- EXPORTING COUNTRIESILLUSTRATION OF LINKS IN A TRADE-SUPPORTED STRATEGY FOR OIL- EXPORTING COUNTRIES

Benefit from sustained values and advantages of NNRR

Conserve biodiversity & eco-systems; benefit from Bio-trade

Secure access to environmental public goods

The links between effectiveness of strategies and WTO rules