Werner Corrales-Leal UNCTAD-UNDP Global Programme on Globalization, Liberalization and Sustainable Human Development Marrakech, April 2004 DEVELOPING LOCAL

Werner Corrales-LealUNCTAD-UNDP Global Programme on

Globalization, Liberalization and Sustainable Human Development Marrakech, April 2004

DEVELOPING LOCAL COMPANIES’ CAPACITIES AND DIVERSIFYING TOWARDS HIGHER VALUE ACTIVITIES IN THE OIL AND GAS SECTOR:

THE VENEZUELAN EXPERIENCE IN ENGINEERING AND CAPITAL GOODS

DEVELOPING LOCAL COMPANIES’ CAPACITIES AND DIVERSIFYING TOWARDS HIGHER VALUE ACTIVITIES IN THE OIL AND GAS SECTOR:

THE VENEZUELAN EXPERIENCE IN ENGINEERING AND CAPITAL GOODS

LESSONS FROM A DEVELOPMENT POLICY CASE AND QUESTIONS ABOUT THE FUTURE IN MULTILATERAL RULES NEGOTIATIONS

NOT AN OFFICIAL UNCTAD RECORD

LIST OF CONTENTSLIST OF CONTENTS

The use of market-friendly active policies : A case of the oil sector in Venezuela.

Clustering in development policy in hydrocarbon-dependent countries.

Opportunities and challenges in multilateral negotiations

PART ONEPART ONE

The use of market-friendly active policies : A case of the oil sector in Venezuela

• 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

MID- EIGHTIES : MAIN CHALLENGES IN THE SECTOR RELATED TO TECHNOLOGICAL CAPABILITIESMID- EIGHTIES : 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

Lack of confidence on local capabilities among many groups Lack of confidence on local capabilities among many groups

• Firm commitment of PDVSA and the Venezuelan private sector

• Public doubts about the success of the Capacity Development 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 of a 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

A STRATEGY FOR CAPACITY DEVELOPMENT IN R&D, ENGINEERING AND CONSTRUCTION SERVICESA STRATEGY FOR CAPACITY DEVELOPMENT IN R&D, ENGINEERING AND CONSTRUCTION SERVICES

• Implementation of SMEs Quality Assurance and Competitiveness Programs

Promotion of domestic suppliers of capital goods and services Promotion of domestic suppliers of capital goods and services

• Export promotion program for capital goods and inputs

• Contracting rules reform introducing practice of 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


• Incentives and financial supports for Suppliers Development Programs

•0

•10

•20

•30

•40

•50

•60

•70

•80

•90

•100

•80 •82 •84 •86 •88 •90 •92 •94 •96 •98 •2000

%

•evolution

•trend

Investment: 2,500 MM/ US$ yr

• Very high improvement in technological capabilities and market share

LONG TERM EVOLUTION OF THE ENGINEERING AND CONSTRUCTION SERVICES 1985 - 2000LONG TERM EVOLUTION OF THE ENGINEERING AND CONSTRUCTION SERVICES 1985 - 2000


• Highly skilled jobs, sources of added value and backward links created

• Further evolution of Engineering & Construction to Integrated Services

PART TWOPART TWO

Clusters and SMEs in development policy in hydrocarbon-dependent countries.

• 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

Clusters and SMEs in development policy in hydrocarbon-dependent countries

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 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


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ACTIVE & ACTIVE & REGULATORY REGULATORY POLICIES POLICIES (THE TOOL BOX(THE TOOL BOX))

COMPETITION

AND ACCESS TO

INFORMATION

POLICIES

MACRO-

ECONOMIC

FRAMEWORK

OF POLICIES

RISK

MANAGEMENT

FRAMEWORKS

NATIONAL NATIONAL ENABLING ENABLING

FRAMEWORKSFRAMEWORKS

RULES ON

PROPERTY

RIGHTS &

INVESTMENT

MANAGING COMPETITIVENESS AND TRADE : RELEVANT POLICY AREAS AND ENABLING FRAMEWORKS MANAGING COMPETITIVENESS AND TRADE : RELEVANT POLICY AREAS AND ENABLING FRAMEWORKS


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


• 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

OPPORTUNITIES AND CHALLENGES FOR SUPPLY-SIDE POLICIES RELATED TO WTO RULESOPPORTUNITIES AND CHALLENGES FOR SUPPLY-SIDE POLICIES RELATED TO 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

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

• Eventual negotiations on investment, public procurement and competition


Documents

Werner Corrales-Leal UNCTAD-UNDP Global Programme on Globalization, Liberalization and Sustainable Human Development Marrakech, April 2004 DEVELOPING LOCAL