Reports

COMPETITIVENESS: REACHING FOR PROSPERITY THROUGH PRODUCTIVITY
WEDNESDAY, DECEMBER 6, 2006
10:00 AM – 12:30 PM

Moderator: Mark Palchick, Womble Carlyle Sandridge & Rice

Discussants: Ben Arrindel, Ernst & Young Caribbean; Dora Currea, Inter-American Development Bank; Jerry Haar, Florida International University; Rodolfo Batres, Office of the Presidential Commissioner for Investment and Competitiveness; Sherry Stephenson, Organization of American States

The Context:
Recent reports from the World Bank and World Economic Forum characterize the CBI region as stagnant, lagging behind the growth and productivity of other emerging markets. Even the adoption of preferential trade agreements have not served as the catalyst for long awaited gains.

The Challenge:

• What proven methods exist at the policy level to increase productivity and competitiveness for the CBI economies?
• What national policies need to be embraced regionally to improve the region’s chances?
• Are we doing enough to promote and protect innovation?

Points and Comments Brought up in the Session:

• 3 Major areas concerning crime were brought up in the session
  • How the state of regional infrastructure affects transportation and logistics and thus competitiveness
  • State of business practices and their influence on competitiveness
  • The level of information communications technology’s (ICT) adoption and its influence on business
• Key observations on competitiveness in the region
  • Model laws, size, location, environment, are not necessarily primary factors of competitiveness. It is a mix of factors: consensus on incentives for private actors, transparent institutions, macro economic stability, infrastructure, technical uptake, learning & education all play intertwining roles.
  • Example was given of Ernst & Young in the Caribbean. The division is expensive to sustain because telecom, transportation and movement of people in region are expensive. Resolution of these and bureaucratically efficient government would boost
    adoption of regional centric firms that are regionally integrated.
• Key observations on how business practices affect competitiveness
  • Management is handed down, labor management is not progressive.
  • Equal income in the region may stymie growth or lead to brain drain.
  • Historically the region has been non-competitive because there were protections at the state, and individual level within firms – loyalty of employers over efficiency.
  • Goal is to develop highly educated and skilled labor. The low-end human capital market is not supported by the cost structure.
  • Protectionism of entrenched companies does not promote competitiveness.
  • Entrepreneurship has a negative image. Many persons find it morally preferable to be lawyers, academics, or doctors.
  • Collaboration is temporary and only among cutthroat firms who prioritize survival over market share.
• Key observations on how state of infrastructure affects competitiveness
  • Just-in-time becomes just-in-case when there are customs delays.
  • There is a need to change the culture of customs service. Guatemala hired customs officers and housed them in dorms to build ties and relationships; this has helped to foster an atmosphere of excellence.
  • Only 14 % of 200km of roads are paved in Latin America. Rate of institutional reform is higher in Africa. Governments need to prioritize competitiveness.
  • Logistical inefficiencies and double logistics costs affect customs reforms. Because of these we cannot expect import based growth and that affect wholesale/manufacturing.
  • U.S. Customs Trade Partnership Against Terrorism (CTPAT) certification is important– supply chain security at all points down to the local producer; otherwise large multinationals will not approach those importers.
• Key observations on the role ICT plays in national and firm-level competitiveness
  • ICT is important driver for economic growth; direct investment increases proportionate to ICT infrastructure
  • Telecom jobs expanded have 3 times faster than other sectors.
  • Governments and businesses cannot survive without cost efficient infrastructure and secure basic infrastructure is expensive and unevenly distributed.
  • A regional strategy that does not add infrastructure but facilitates ICT growth is required.

Questions and Answers Brought up in the Session:

• How do we avoid human capital flight?

Recommendations Made:

• Education was agreed upon as key area that held the potential to influence competitiveness:
  • Willingness to accept risk and ability to learn need to be instilled at a young age through education.
  • The educational systems need to train youth to be creative and independent to form a basis for an entrepreneurial class.
  • Education in global business practices will help stem poor business practices.
• Adoption of global business practices was also recommended for business in the region:
  • An example was given of Barbados national initiative on service excellence and Barbados social partners has delivered private – public sector competitiveness.
    
  • Supersession needs to be dealt with, as well as short-term gains over long-term prosperity.
  • Sound fiscal and economic policies were generally agreed upon as conducing to competitiveness for FDI and domestic industry.

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