contact: expcom@worldbank international trade department

Contact:[email protected] Trade Department

Tools for Export Competitiveness:

Policies and Institutions for Overcoming Government and Market Failures

http://competitiveness

Mallika ShakyaEconomist

International Trade Department

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mailto:[email protected]

http://c/

Incentive FrameworkThe necessary macro and trade policy

Conditions for trade growth

Hard and Soft InfrastructureImproving the business enabling

environment and Infrastructure for exports

Overcoming market/govt failuresTo achieve: Innovation, technology, quality, standards

Global value chain and linkagesIndustrial zones and clusters

Export and Investment promotion

A Conceptual Framework 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

DTISs - Precursor Work on Export Competitiveness

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WHY do government/market failures arise?

• costs of discovery

• asymmetric information

• coordination externalities

• lack of supporting services for industry

• missing public inputsNote: these will vary for low-, middle-, and high-income countries

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Different types of institutions for a collaborative process

Public sector Private sector

industrial zones

innovation and technology foundations

business registrar

standards and certificationinvestment promotion

export promotion

business service providers

arbitrators

lawyersbusiness associationsline ministries

market research agencies

training institutes

universities

R&DIPRs

EXAMPLES

Fundacion Chile

Chinese special economic zones

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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)

Role of private sector:• Assess actual risks and take

action• Provide relevant info about

obstacles and opportunities• Lubricate machineries on the

ground to deal with the informal constraints

Institutional incrementalism

formal institutionsbusiness assoc.,

parastatals, researchinstitutions

informal institutions trust, traditional know-how,

social capital

search engineslittle is known ex-ante

about instruments; emphasize more on current

successes (large buyers, diaspora ventures) to

develop broader corrective measures

1. industry-specific approach for identifying constraints

2. micro-foundations or clusters approach

Overcoming barriers to export competitiveness:Methodologies are diverse but complementary

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1. INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY CONSTRAINTS


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‘Picking Winners’ vs. working from revealed comparative advantage

Source: UN Comtrade Database and FIAS analysis

INDUSTRY-SPECIFIC ANALYSES TO IDENTIFY CONSTRAINTS - 1

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Key findings from MGI’s sector-specific analyses

Source: MGI India Study



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Methodology and information sources for industry-specific analysis

Source: Palmade (2005)



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Big differences in relative sector differences in India Productivity, U.S. = 100



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Mozambique Case Study: Policy and institutional measures

ApparelIndustry

• Labor law reform• Education/workforce trg

• Specialized infrastructure• Licensing reform• Specialized business services

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

• Tax simplifications• Investment/export promotion


Figure 2.1: Hourly wages in apparel assembly

(US cents)

179.4

125

72

46

35

33

31

30

27

26

26

25

21

18

14

S Africa

Mauritius

EPZ China

Lesotho

Sri Lanka

Swaziland

Nepal

Kenya

India

Madagascar

Pakistan

Mozambique++

Bangladesh

Ghana

Ethiopia

Table 2.1: Factory-floor productivity and labor costs in apparel assembly

Men’s 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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Mozambique: Apparel Labor Wages and Productivity(Competitiveness = productivity/costs)



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Area Best-in-class features Best practice Mozambique

Best practice South Africa

Best practice Lesotho

economies of scale • Manager-worker ratio above 1:500 • Multiple factory plants specializing on different products and jobs • Bulk import of production inputs through a bonded warehouse

system • Standardized coordination upstream and downstream

use of specialized technology

• Electronic copies of layouts are sent to computer-controlled cutting machines

• Computers determine optimum details for washing, dyeing and ironing of pattern pieces

• Automatic body press where garments are pressed in one shot • System of compressed air, steam and solvents

labor costs, productivity and skills

• Productivity-based piece-rate-wage system vs monthly wages • Unskilled workers receive training on machine-operating,

productivity and factory floor culture • Supervisors receive training on productivity and management • Technicians receive periodic training on machine maintenance

and repair

production planning • Correct workspace design with single-layer working environment and ideal entries/exits and temperature controls

• Effective material purchasing planning ensuring no stopover • Planning around supplier lead times and consistent on-time

deliveries

performance tracking

• Tracking of productivity by activity time-keeping • Computerized monitoring of individual labor productivity • Adjustment of the production plan every four hours for

irregularities • Managers rewarded as per productivity

all conditions undeveloped all conditions developed Source: Mozambique CEM

Regional Competitiveness of the Mozambican Apparels



LABOR INFRASTRUCTUREAND 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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Mozambique: Policy Implications for Apparels


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2. MICRO-FOUNDATIONS OR CLUSTERS APPROACH


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MICRO-FOUNDATIONS OR CLUSTERS APPROACH - 1

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HotelsHotelsGuest HousesHomestaysVillages

WatsMuseumsCavesWaterfallActivities

Airlines, Domestic

AirlinesAirportBusesRiver Cruises

Tour Guides / Interpreters

Tour OperatorsLuang PrabangVientianeAbroad

Restaurants

PropertyServices

Souvenirs, Duty Free

ShoppingRetail StoresNight marketsHandicraft ShopsDuty Free

Banks,Foreign

Exchange

Financial ServicesBanksForeign ExchangeATMs

Local Transportation

Local TransportationTaxies / Tuk-tuksLocal busesCharter ServicesRiver Boats

MaintenanceServices

InfrastructureMaintenanceUtilities

Government agenciesNTATourism PoliceLocal Tourism OfficeImmigration ServicesCustoms

e.g. Universities,EducationNational University (Vientn)Lng Prbg Tourism School

Industry Groupse.g. Tourism

Industry GroupsLATAHotel and Restaurant AssocHeritage Committee

FoodSuppliers

Specialty Food

Suppliers

Public Relations & Market Research

Services

Media / Information Travel PressTelevision, RadioInternet

Local retail, health care, andother services

Local HealthcareLao Traditional MassageSpa ServicesHospitals

CommunicationsProvidersInternetPhone

International AgenciesAsian Development Bank, SNV, UNESCOWorld Bank

Tourists

Luang Prabang Tourism Cluster

Source: Lao PDR Export Competitiveness Report, World Bank, 2005. JAA Analysis.

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Source: Lao PDR Export Competitiveness Report, World Bank, 2005. JAA Analysis.

contact: expcom@worldbank international trade department

Documents

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trade departmentmethodology

trade departmenttools

trade department1

trade departmentkey

sufficient trade logistics

export competitiveness