??af??e?a 1

1
OECD EURASIA COMPETITIVENESS PROGRAMME INITIATIVE
FOR THE SOUTH CAUCASUS AND UKRAINE
Impact of the crisis on regional economies and
economic co-operation initiatives in the Black
Sea and Caspian Thessaloniki, November 2009
2

1. The competitiveness challenge
2. Potential policy priorities to enhance
   competitiveness
3. The need for a focused and demand driven regional
   approach

3
GDP growth in the region is impacted by the
financial crisisAverage GDP growth falling in
2009
Source EBRD e. estimate p. projection
Source OECD Development Centre / IMF
4
Reliance on external financing is increasingOn
average 13 of GDP for BSEC region
Source OECD Development Centre / IMF
5
A measure of competitiveness FDI growth is
slowing down How to support the quality and
quantity of FDI?
How to improve both quantity and quality of FDI?
FDI in USD million
SEE Second wave of FDI
Central Europe First Wave of FDI
SCU Third wave?
Impact of the financial crisis
estimate
projection
Source EBRD Transition report 2008, OECD Analysis
6
The region remains cost competitive Example Cost
competitiveness in labour for the Republic of
Moldova
Example of SEE
Leveraging their competitive labour costs in
services
Up to 7 times lower
Note Monthly wages have been calculated on
2003-05 or 2003-06 average using the LABORSTA
Labour Statistics Database and covering, unless
specified only the category J (financial
intermediation) and K (business activities, real
estate and renting). For Albania overall figures
are based on category I (transport, storage and
communications) due to the absence of statistics
on J/K in the ILO databases (1) average monthly
wages in all services
Source International Labour Organization
zdnetasia Wall Street Journal, OECD interviews
7
Cost competitiveness is a short term
advantage The need to move up the value-chain

• Cost competitiveness is not sustainable
• Markets like India and China are clear low-cost
  alternatives.
• Cost levels in some sectors are increasing by
  up to 15 annually, impacting negatively on
  margins and potentially eroding market share
  levels.
• Limited access to finance and strategies to
  reinvest capital in technology and human capital
  is a risk.
• Significant gaps in human capital limit the
  opportunities to move up the value chain
• Skills gaps in high growth industries such as
  ICT reach 60.
• Coordination between ministries of education and
  economy and dialogue with civil society are
  limited.
• Limited focus on sector specific policy barriers
  as well value-added services

8
                                  
Policy priorities to enhance competitiveness Based
on feedback from countries of the region
Which key areas need to be address to enhance
investment and competitiveness in the Black Sea
(SCU)?
How to tailor human capital policies and
practices to support financial and business
services?
Sustained Competitiveness
How to support FDI by removing policy barriers
and supporting specific sectors?
How to address the impact of the financial
crisis, especially in terms of access to finance?
The need to focus on SME competitiveness
9
OECD Eurasia Competitiveness ProgrammeNew OECD
Mandate (2008) covering two regions and 11
countries

• Prioritisation of policies to improve the
  business climate
• Policy Working Groups
• Policy guideline and targeted implementation

Enhancing Regional Business Climate

• OECD Sector Competitiveness Strategy
• Surveys of investors and private sector
  perception
• Evaluation of policy reforms
• Supporting in implementing reforms

Improving National Competitiveness
10
Example Monitoring policies at the regional
level Addressing reforms through regional working
groups and peer review
Example for South East Europe
The OECD Investment Reform Index The SME Charter
Regional Policy Working Group
Chaired by a country of the region and OECD
country Strong involvement of regional policy
makers, private sector and OECD experts Focused
on delivering a How To guideline on
implementation of reforms in the targeted policy
area
11
                                  
OECD Policies for Competitiveness Assessment
Framework
Which key topics should be addressed within each
Policy Working Group?
Dimension Sub dimension Dimension Sub dimension Dimension Sub dimension Dimension Sub dimension Dimension Sub dimension Dimension Sub dimension
Investment Climate Policy and Promotion Investment Climate Policy and Promotion Investment Climate Policy and Promotion Investment Climate Policy and Promotion Investment Climate Policy and Promotion Investment Climate Policy and Promotion

Sub dimension
SCORE SCORE SCORE SCORE SCORE SCORE
Policies for Competitiveness Dimensions

• Investment Climate Policy and Promotion
• Financial Markets Development
• Human Capital for financial and business
  services
• Others

Sub dimension Indicators Sub dimension Indicators Sub dimension Indicators Sub dimension Indicators Sub dimension Indicators Sub dimension Indicators
Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation

Indicator
SCORE SCORE SCORE SCORE SCORE SCORE
Indicators Level of Reform Indicators Level of Reform Indicators Level of Reform Indicators Level of Reform Indicators Level of Reform Indicators Level of Reform Indicators Level of Reform
Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation Investment Promotion and Facilitation

Example of Indicators Strategy
Example of Indicators Implementing Agency
Example of Indicators Monitoring and Evaluation
Example of Indicators Sub-national coordination
Example of Indicators FDI-SME linkages
Example of Indicators Client relationship management (CRM)
Example of Indicators Policy Advocacy
Example of Indicators Aftercare services
Example of Indicators Free Economic Zones
SCORE SCORE SCORE SCORE SCORE SCORE SCORE
Level 1
Level 2
Level 3
Level 4
Level 5
Source OECD PfC Assessment Framework
12
Example Investment climate policy and promotion
Initial area of focus
Initial area of focus
Promotion and Facilitation
Transparency
FDI Policy

• Non-discrimination
• Restrictions to national treatment
• Review of restrictions to national treatment
• Approval procedures
• Admittance of business personnel
• Transfers of FDI related capital
• FDI incentives
• Performance requirements
• Property rights
• Land ownership
• Titling and cadastre
• Intellectual property
• Investor protection
• Expropriation guarantees
• International agreements
• Arbitration

• Framework
• Strategy
• Institutional support
• Monitoring and evaluation
• National and sub-national coordination
• Investment promotion services and activities
• FDI-SME linkages
• One stop shop
• Client relationship management
• Policy advocacy
• Aftercare services
• Free Economic Zones

• Publication avenues and tools
• Prior notification and stakeholder consultations
• Procedural transparency

Source OECD PfC Assessment Framework

13
The need to focus on Investment Promotion and
Facilitation Overall high level of reform
Source OECD Survey
14
Good FDI performance and average FDI potential
FDI Performance and Potential
High FDI Performance
Low FDI Performance
FDI Performance is measured through the ratio of
a countrys share in global FDI inflows to its
share in global GDP.
Below potential
Front-runners
Hong Kong,China
Luxembourg
Norway
UAE
High FDI Potential

• FDI Potential is measured
• through a wide set of
• indicators such as
• GDP per capita and growth
• Share of global exports
• Share of RD spending
• Country risk
• Share of world FDI stock

Kazakhstan
Median of 141 countries
Czech Republic
Jordan
Turkey
Azerbaijan
Egypt
Armenia
Low FDI Potential
Georgia
Under-performers
Above potential
FDI/GDP ratio 1 (world shares)
FDI Inflows lt 0
Improvement of FDI attractiveness through policy
reform
Source UNCTAD 2004-07, Ranking of 141 countries,
OECD Analysis
15
Example Developing and implementing country /
sector specific competitiveness strategies
Example for Republic of Moldova
Sector specific approaches help focus reform
efforts
16
Engaging the region and listening to country
priorities

• The initiative was formally launched at a
  Ministerial Conference held on 1 April 2009 at
  the OECD
• Ministers and high-level representatives of all
  countries of the region (Armenia, Azerbaijan,
  Georgia, Republic of Moldova and Ukraine) adopted
  a statement to enhance competitiveness in the
  region
• The conference was chaired by Poland and Sweden
  in collaboration with Czech EU Presidency and the
  EC

Strong collaboration with the private sector
17

Contact details
ORGANISATION FOR ECONOMIC COOPERATION AND
DEVELOPMENT Directorate for Financial and
Enterprise Affairs Private Sector Development
Division
Fadi Farra Head Eurasia Competitiveness
Programme Tel [phone] Fax  33 1
45249335 Mobile [phone] e-mail Fadi.Farr
a_at_oecd.org
Daniel Quadbeck Policy Analyst Eurasia
Competitiveness Programme Tel 33 1
45247522 Fax  [phone] e-mail Daniel.Qua
dbeck_at_oecd.org