Contact:

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Tools for Export Competitiveness Policies and
Institutions for Overcoming Government and
Market Failures http//competitiveness Mallika
Shakya Economist International Trade Department

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2
A Conceptual Framework on Export Competitiveness

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DTISs - Precursor Work on Export Competitiveness

• About 40 DTIS completed so far
• Focus on impediments to export growth in LICs
• Main findings
• trade policy reforms important, but not
  sufficient
• trade logistics, infrastructure, backbone
  services
• proactive policies and measures to overcome the
• government and market failures

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4

• WHY do government/market failures arise?
• costs of discovery
• asymmetric information
• coordination externalities
• lack of supporting services for industry
• missing public inputs
• Note these will vary for low-, middle-, and
  high-income countries

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6
Different types of institutions for a
collaborative process
Public sector
Private sector
line ministries
business associations
lawyers
business registrar
export promotion
arbitrators
training institutes
investment promotion
business service providers
standards and certification
market research agencies
universities
innovation and technology foundations
IPRs
RD
industrial zones
EXAMPLES
Fundacion Chile
Chinese special economic zones

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7
Institutional incrementalism
formal institutions business assoc., parastatals,
research institutions informal institutions
trust, traditional know-how, social
capital search engines little is known
ex-ante about instruments emphasize more on
current successes (large buyers, diaspora
ventures) to develop broader corrective measures

• Role of government
• Set policies
• Internalize the externalities associated with
  cost-discovery process
• Provide public inputs (infrastructure and
  backbone services, property rights, harmonization
  of standards)

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8
Overcoming barriers to export competitiveness Met
hodologies are diverse but complementary
1. industry-specific approach for identifying
constraints 2. micro-foundations or clusters
approach

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1. INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS

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10
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 1
Picking Winners vs. working from revealed
comparative advantage
Source UN Comtrade Database and FIAS analysis

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11
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 2
Key findings from MGIs sector-specific analyses
Source MGI India Study

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12
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 3
Methodology and information sources for
industry-specific analysis
Source Palmade (2005)

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13
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 4
Big differences in relative sector differences in
India
Productivity, U.S. 100

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14
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 5
Mozambique Case Study Policy and institutional
measures
Apparel Industry

• Education/workforce trg

• Labor law reform

• Specialized infrastructure

• Licensing reform

• Specialized business services

• Tax simplifications

• Investment/export promotion

• Develop a critical mass of firms for the changes
  to take place

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15
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 6
Mozambique Apparel Labor Wages and Productivity
(Competitiveness productivity/costs)
Table 2.1 Factory-floor productivity and labor costs in apparel assembly Table 2.1 Factory-floor productivity and labor costs in apparel assembly Table 2.1 Factory-floor productivity and labor costs in apparel assembly
Mens casual Shirts/machine operator/day Labor cost per shirt (US cents)
Mozambique 10-11 16
Ghana 12 12
Ethiopia 10-12 12
Kenya 12-15 18
Madagascar 14-15 16
Lesotho 18 19
South Africa 15 65
India 16 17
EPZ China 18-22 29
Source Labor productivity and costs from Eifert, Gelb and Ramachandran (2005), p. 19) Ethiopia data calculated from GDS LLC powerpoint for the World Bank (2007) Hourly wages collected from various sources, most of them the government labor policies. Mozambique wage indicates the minimum industry wage specified under the national labor law.

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16
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 7
Regional Competitiveness of the Mozambican
Apparels

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17
INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY
CONSTRAINTS - 8
Mozambique Policy Implications for Apparels
LABOR INFRASTRUCTURE AND LAND DEVELOP A CRITICAL MASS
Give producers the possibility of productivity-based piece-rate-wage system to set up the right incentive framework on factory floors. Reduce minimum wages so it reflects the market situation. Labor training at three key levels (i) short-term in-factory training for machinists (ii) supervisory training for junior managers and (iii) heavy machine operating and maintenance training for technicians. Develop appropriate public- private-partnership required for delivery of such training. Identify suitable land for industrial zones and provide basic services such as water, electricity and sewage systems. Simplify the licensing requirements for construction of simple factory shells and establish standards and enforcement systems so factory shells meet international safety and environmental standards. First option Auction the serviced land to private builders on a cost-plus basis. Second option Form a public-private-partnership which will construct factory shells, develop industry-specific services such as effluent treatment plants and chemical disposal. Attract South African investors who are severely affected from the failure of EU-SA trade agreements as well as the intensifying impacts of labor unionism within factories. Clarify Mozambican trade policy to target South African high-end market. Opportunistically engage with US, Asian and European investors for the AGOA-generated US/EU markets. Act as a facilitator in developing clusters that would provide specialized business services, e.g., packaging, finishing, laundry, embroidery, screen-printing, trucking and warehouse facilities, expo events, etc.

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18
2. MICRO-FOUNDATIONS OR CLUSTERS APPROACH

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19
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 1

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20
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 2

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21
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 3

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22
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 4

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Department
23
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 5

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Department
24
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 6

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Department
25
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 7

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26
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 8
Luang Prabang Tourism Cluster
Source Lao PDR Export Competitiveness Report,
World Bank, 2005. JAA Analysis.

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27
MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 9
Source Lao PDR Export Competitiveness Report,
World Bank, 2005. JAA Analysis.

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Department