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Economic Development of the Maghreb:The Role of Technology and Innovative

SMEs

Pier A. Abetti, Ph DLally School of Management and Technology

Rensselaer Polytechnic InstituteTroy, New York, USA

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1. Business competitiveness andgrowth competitiveness of countries

2. World country rankings 2004

3. Maghreb – country rankings 2004

4. Maghreb – situation analysis

5. A roadmap for growth: the role of technology

6. Examples of countries that achieved high growth through technology

7. Technology utilization, transfer and innovation

8. The role of innovative SMEs for economic development and job creation

9. Conclusion: the challenge and a roadmap for the Maghreb

Outline

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• SourceWorld economic forum (Geneva) and Harvard Business School (Prof. Michael Porter)

• DefinitionAbility of firms in a country to create valuable goods and services using efficient methods

• High wages, exports, and attractive returns to capital

• Improved quality of life and sustained investment

• ObjectiveRankings of 117 countries

Business Competitiveness of Countries

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• SourceWorld economic forum (Geneva) and Harvard Business School (Prof. Michael Porter)

• DefinitionThe set of country institutions and economic policies supportive of high rates of economic growth in the medium term

• ObjectiveBest estimate of prospects for growth over the coming five years of 117 economies

World Growth Competitiveness of Countries

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• Methodology

Combination of hard data and executive opinion survey of 4600 business leaders

These leaders compare aspects of local business environment with global standards and make investments and policy decisions that drive economic growth and development

World Growth Competitiveness – 2

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1. Technology

2. Public institutions

3. Macroeconomic environment

Growth CompetitivenessRanking Criteria

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CountryBusiness

Comp. RankGrowth

Comp. Rank Δ

United States 1 2 -1

Finland 2 1 +1

Germany 3 15 -12

Denmark 4 4 0

Singapore 5 6 -1

United Kingdom 6 13 -7

Switzerland 7 8 -1

Japan 8 12 -4

France 11 30 -19

Country Competitiveness Rankings 2005 – 1

* Countries to watch

*

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CountryBusiness

Comp. RankGrowth

Comp. Rank Δ

Taiwan 14 5 +9

Ireland 17 26 -9

Estonia 26 20 +6

South Africa 28 42 -14

Chile 29 23 +6

India 31 50 -19

Tunisia 35 40 -5

Turkey 51 66 -15

China 57 49 +8

Egypt 71 53 +18

Morocco 79 76 +3

Algeria 95 78 +17

Country Competitiveness Rankings 2005 – 2

* Countries to watch

***

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Implications for the Maghreb

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Tunisia Algeria Morocco

Business competitiveness 35 95 79

– Company operations 46 111 80

– Business Environment 34 75 88

Growth competitiveness 40 78 76

– Macroeconomic environment 34 44 67

– Public institutions 40 81 85

– Technology 60 114 78

Maghreb – Summary of Rankings 2005

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1. Tunisia is the leader among North African countries and second among African countries (after South Africa)

2. Tunisia’s leadership is caused by good macroeconomic and business environments with solid public institutions

3. However, Tunisia is falling behind in growth competitiveness due to inefficient company operations

4. In turn, these operations and economic growth are affected by the below average technology ranking

Tunisia – Situation Analysis

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1. Algeria is an emerging country, fourth in North Africa

2. Algeria’s average position is caused by poor business environment, public institutions and inefficient company operations

3. Algeria is moving ahead rapidly in growth competitiveness thanks to good macroeconomic environment

4. However, the very low technology ranking negatively affects company operations and economic growth

Algeria – Situation Analysis

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1. Morocco is third among North African countries

2. Morocco’s position is caused by below average public institutions, business and macroeconomic environment

3. Morocco’s slowly improving growth competitiveness is hampered by inefficient company operations

4. In turn, these operations and economic growth are seriously affected by the low technology ranking

Morocco – Situation Analysis

Technology is the major challenge for the Maghreb

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1. World competitiveness is driven by five factors that can be visualized as five drivers of economic growth

2. Each country should strengthen the strongest horse to maintain momentum

A Roadmap for Growth of the Maghreb

Tunisia – Business environmentAlgeria – Macroeconomic environmentMorocco – Macroeconomic environment

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World competitiveness can also be visualized as a chain of five links. The strength of the chain is determined by the weakest link

Technology is the weakest link for the Maghreb

Technology is the key for improving operations, developing exports and creating high-value-added employment

A Roadmap for Growth of the Maghreb – 2

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4.

5.

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How can the Maghreb improve its technology position?

By following the example of young, entrepreneurial countries

that have achieved high economic growth

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CountryIndep. (date)

Size(1000 km2)

Population (millions)

GDP/PP*($billions)

GDP/PP*Capita ($)

GDP Growth%/year

Techn.Rank

Finland1922

(1946)337 5.2 151 29,000 3.0 2

Taiwan 1946 36 22.5 576 25,300 6.0 3

Estonia 1991 45 1.4 19 14,300 6.0 18

Ireland 1937 70 3.9 126 31,900 5.1 31

Tunisia 1956 163 10.0 71 7,100 5.1 60

Morocco 1956 446 32.0 134 4,200 4.4 78

Algeria 1962 2382 32.0 212 6,600 6.1 114

Examples of High Growth Through Technology

* PP = Purchasing Parity

Source: U.S. Government (2004 estimate)

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Technology can be embodied in

• Products (cellular phones – Nokia in Finland)

• Processes (mosquito repellents – Zobele in Italy, Malaysia)

• Services (software – Microsoft in USA, Ireland, India)

Three Modalities forTechnology Utilization

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1. Technology required by the Maghreb countries is available at no cost, or with moderate fees from USA, CEE, and Japan

2. However, technology must be selectively sought and transferred proactively and continuously

3. Two extreme cases:

• Mexico and Taiwan had equal access to U.S. technology since 1950

• Taiwan is now ranked 3, Mexico 57

Technology Transfer

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1. Technology is transferred by people, not paper

2. Market pull transfers more technology than technology push

3. Embodied technology is worth much more than disembodied technology

4. Initially technology transfer rate (D = distance), later almost independent of distance

Abetti’s Laws for Technology Transfer

–~1D_

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1. Once technology has been successfully transferred it must be adapted and improved through technological innovation

2. Successful innovation implies the profitable utilization of the new technology for new applications and markets

3. Sources of innovation:

• Universities• Large companies• Government labs• High-value-added SMEs

4. High-value-added SMEs will be the major contributors to growth, employment and world competitiveness in the Maghreb

Technological Innovation

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CountryIndep. (date)

Size(1000 km2)

Population (millions)

GDP/PP*($billions)

GDP/PP*Capita ($)

GDP Growth%/year

Techn.Rank

Finland1922

(1946)337 5.2 151 29,000 3.0 2

Taiwan 1946 36 22.5 576 25,300 6.0 3

Estonia 1991 45 1.4 19 14,300 6.0 18

Ireland 1937 70 3.9 126 31,900 5.1 31

Examples of High Growth Through Technology

SMEs are the major contributors of these economies

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Innovative SMEs represent a major national resource, because they:

• Create direct high-value-added jobs

• Create indirect jobs (5 to 1 factor)

• Are more innovative and efficient than large enterprises (public or private)

• Promote exports

• Improve the quality of life

Innovative SMEs – 1

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Innovative SMEs represent a major national resource, because they:

• Have higher survival rate than other new businesses

• Do not rely on scarce natural resources

• Are diversified in technologies and markets

• Are models for developing innovation in the country

• Are the major source of job creation

Innovative SMEs – 2

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U.S. Fortune 500 Share of Employment

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U.S. Job Growth, ’90-’94

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• Fortune 500 share of employment plummeted from 19% in 1968 to 9% in 1996

• Large businesses dropped nearly 4 million jobs in 1990-94

• Firms with less than 50 employees swelled by 8 million new jobs. The smallest created the most jobs

Entrepreneurship Explosion

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Creation of high-value-added jobs for the new well-educated booming generations

Prevent unemployment, emigration, social unrest

Healthy, sustainable economic growth

Conclusion – The Challenge for the Maghreb

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Economic growth

High-value-added employment, exports, world trade balance

Innovative SMEs

Technology and management skills, enlightened government policies

We are here to work with you!

Conclusion – A Roadmap for the Maghreb