Enhancing Business Competitiveness

Minister of Planning, Economic and Social Restructuring and Gender Affairs

Senator the Honourable Dr. Bhoendradatt Tewarie

Business and Banking Conference Hilton Trinidad Hotel and Conference Centre

June 22, 2011

COMPETITIVENESS IS AN IMPERATIVE

• To improve the quality of life and the standard of living of our citizens, we have to become an active player in the (non-energy) global economy

• Global thinking must be the basis on which we act locally

• Countries worldwide and particularly regions within the large countries (Shanghai, Bangalore) are rapidly expanding their capabilities to engage in value added activities and compete in the global market place

• Competitive businesses are those which are able to sustain high levels of productivity which has positive consequences for economic and social prosperity

HOW IS THE WORLD CHANGING?• The Global Economy is being transformed by a new wave of

globalisation and technological change - improvements in communications, advances in IT, declining

transport costs, accelerated technical and scientific progress, greater economic integration

• The convergence of these factors has put growing pressure on countries to restructure their economic base and rethink and refocus human capital development

• The Global Economy is now being driven by ideas which are the primary catalyst for economic growth

• In this environment, the key to prosperity is increasing productivity and the basis for increasing productivity is innovation

• The assumption is that efficiency, effectiveness and responsiveness are the minimum standards required

HOW MUST OUR STRATEGY CHANGE?

Drivers of Economic Prosperity

OLD NEW

Natural ResourcesRaw ManpowerPopulation GrowthIndustrialisationGeographyClimate Military Power

IdeasCreativity/TalentEntrepreneursInnovation ProductivityEducation and TrainingStrong InstitutionsNew Technologies

All Interconnected

New Basis for Global Competitiveness

HOW MUST OUR STRATEGY CHANGE?

• The emphasis now must be on nurturing the talent and creativity of citizens and providing the conditions conducive to innovation and entrepreneurial growth

• The education and training system must be re-oriented to provide the knowledge and skills set required by the new economy

• Routine work and mass production must give way to creative work and mass customisation

• Firms must be a source of ideas that drive innovation in the global market place

• We must also look at the potential for creating an innovation region with our Caribbean neighbours for the purpose of mutual gain

THE NEW ECONOMY

Industrial Economy Ideas Economy

RAW MATERIALS Natural Resources IdeasLabourCapital

CUSTOMER FOCUS Mass Production Mass Customisation based on IT and Product Design

ORGANISATION Large Corporations Entrepreneurs, Networks,Economies of Scale Small Scale

SUCCESS FACTORS Labour, Quality Talent, Speed, Innovation,Low Cost, Stability, Flexibility, CustomisationControl

Source: Collaborative Economics, Joint Venture: Silicon Valley’s 2006 Index of Silicon Valley

GLOBAL COMPETITIVENESS INDEX

Year RANK

2010-2011 84TH of 139 countries

2009-2010 86th of 133 countries

2008-2009 92nd of 134 countries

COUNTRY RANK

Chile 30

Barbados 43

Costa Rica 56

Uruguay 64

Jamaica 95

2010-2011

Trinidad and Tobago

Source: World Economic Forum: Global Competitiveness Reports

HOW DO WE ENHANCE COMPETITIVENESS?

• To begin with, the issues of competitiveness, diversification, productivity , innovation, entrepreneurship and wealth creation go hand in hand

• As such, policy shifts have to be implemented in several areas and there must be complementarity. From the perspective of the Government, the strategic approaches must be integrated. This also applies to private sector

• We have little choice … the Trinidad and Tobago engine cannot run solely on oil and gas for much longer. Our survival depends on the shifts we engineer now, not just in terms of the sectors we focus on but also in terms of our development strategy

• There is a role for Government as there is for the private sector and indeed all individual business enterprises

The Government has a responsibility to improve the business environment, build a quality education and training system and implement a coherent economic strategy

We must create a strong links between education curriculum, throughput of graduates, diversification and the absorptive capacity of the economy and labour market

Private enterprises must invest more, be less risk averse, upgrade their processes, build human capital and move towards closer international engagement

WHAT THEN SHOULD BE THE FOCUS OF OUR COMPETITIVENESS AGENDA?

• Human Capital Development • Building a National Innovation Framework • Raising Productivity Levels• Support for Entrepreneurs and Building the Capacity of

MSMEs• Continued Prudent Macroeconomic Management and

Implementation of a viable Diversification Strategy • Strengthening the Institutional and Regulatory Environment • Continued Mainstreaming of Gender

PRIORITY: HUMAN CAPITAL DEVELOPMENT

• At the core of the agenda is the issue of human capital and the link between research, human imagination, creativity, and product and service creation

• Education and Training are critical for building a capacity to innovate and compete in global markets. The skills and competencies of the workforce is a major factor in productivity and in diversification. The workforce must have continuous access to new knowledge and be trained and retrained in new processes and the use of new technologies

• However, innovation is not solely dependent on formal training and knowledge.

Tacit knowledge is as valuable as theoretical knowledge.

• Curricula reform is a priority. Porter places emphasis on high education standards as well as the need for education and training with a strong practical orientation

• The through puts of the tertiary and vocational sectors must be closely aligned with the requirements of industry. This can be achieved through closer collaboration between educational institutions and employers

• The intellectual capital pool of any country is a competitive asset and can attract diversified investment

5 - 9

10 - 14

15 - 19

20 - 24

Total

0 50000 100000 150000 200000 250000 300000 350000 400000 450000 500000

90188

110640

75141

14531

290500

92823

114915

122851

98798

429387

School-Going Age Population to School Attending Population by Age: 2000

Total School-Going Age Population

Attending (Full & part-Time)

PRIORITY: HUMAN CAPITAL DEVELOPMENT

Years

Source: CSO

Less than 15%

PRIORITY: HUMAN CAPITAL DEVELOPMENT

UWI Enrollment Rate - approximately 11%.Less than 3% Graduate

Source: Ministry of Education, MSTTE and CSO

UWI Graduates 2008-2009 completing a 3-year degree

UWI Enrollment 2005-2006 (In relation to No. of persons finishing Secondary School in 2004/2005)

Pupils who finish Secondary School 2004-2005 (In relation to the number of students enrolled in Secondary School in 1997-1998)

Secondary School Enrollment @ 1997-1998 (In comparison to the No. of students finishing Primary School in 1996/1997)

Pupils finishing Grade 7 @ 1996-1997 (In relation to the number of students enrolled in Primary School in 1988/1990)

Primary School Enrollment Grade 1 @ 1990-1991

Pre-School Enrollment 1988-1990 (as a % of the Pre-School Going Age Population in 1988-1990)

-40 -20 0 20 40 60 80 100 120

2.57

10.8

69.4

75

92

100

50

-8.23

-15.6

-8

Enrollment and Estimated Progression along the various levels of the Education System 1988-2009

GapProportion of Students

PRIORITY: HUMAN CAPITAL DEVELOPMENT

2008/2009 2009/2010

Enrollment in institutions Secondary schools 100374 97996

Enrollment in institutions Tertiary Level Enrollment 55635 52088

10000

30000

50000

70000

90000

110000

Enrollment in Institutions at Secondary and Tertiary Levels 2008/2009- 2009/2010

Source: MSTTE and Ministry of Education

PRIORITY: HUMAN CAPITAL DEVELOPMENT Key Initiatives:

• Upgrade and expansion of Early Childhood Care and Education

• Revision of the curricula at the Early Childhood Care, Primary and Secondary Education levels. The secondary school curricula will be revised in order to incorporate intellectual

development, creativity and the development of critical thinking skills

• Expansion of the range of technical vocational offerings in order to increase options and choice

• Promotion of a system of entrepreneurship and apprenticeship. All major industrial firms will be encouraged to operate apprenticeship programmes for youth so inclined and to engage interns from the educational system.

• Review of the curriculum for all certification programmes for teachers

• Inclusion of technical/vocational areas under GATE

• Development of an Integrated Learning Campus in Tobago

• Expansion of tertiary education to achieve a 60% participation rate by 2015

PRIORITY: BUILDING A NATIONAL INNOVATION FRAMEWORK

• The Framework must create an integrated knowledge infrastructure which provides for active collaboration among the key actors – the education and research institutes, private business, entrepreneurs and the regulatory and financing institutions and leveraging R&D for commercial purposes

• It must engender a culture of critical thinking and creativity within

schools and business enterprises as well as the wider national community. Business enterprises must place emphasis on developing their capacity to adopt and use new technologies to enhance productivity

• There must be support mechanisms for encouraging investment in R&D, new industries, new business systems and clusters, improved products, processes and methods and new business creation

Expenditure on Research and Development, 2006 - 2009

Year

Government Expenditure

(TT$M)* GDP (TT$M) % of GDP

2006 64.082105 115951.2 0.06

2007 62.853658 132280.8 0.05

2008 53.844165 163324.9 0.03

2009 65.813633 133533.6 0.05

*Revised

Source: NIHERST Survey of Science and Technology Indicators Survey

Central Bank of Trinidad and Tobago

PRIORITY: INVESTMENT IN R&D

Below the threshold of 1% of GDP that UNESCO considered as a minimum 3 decades ago

90 % of R&D investments in developed counties come from the private sector, in LAC, this figure is only 10%

PRIORITY: BUILDING A NATIONAL INNOVATION FRAMEWORK

Key Initiatives:

• A first round of six public consultations was conducted on the proposed elements of a National Innovation

Framework

• A foresighting exercise is to commence shortly involving industry experts, members of the national community and the Diaspora which will identify sectors/areas to be targeted as part of a national innovation and

diversification strategy

PRIORITY: RAISING PRODUCTIVITY LEVELS

• Low productivity levels has been identified as the main reason most countries in Latin America and the Caribbean have lagged behind other countries in terms of growth rates

OVERALL GCI INDEX 2010-2011

Labour Market Efficiency

Country/Economy

Rank (139 countries)

Score Rank (139 countries)

Score

Singapore 3 5.5 1 5.9

Sweden 2 5.6 18 4.9

Malaysia 26 4.9 35 4.7

Trinidad and Tobago

84 3.97 82 4.3

Jamaica 95 3.9 83 4.2

Barbados 43 4.5 49 4.6

Costa Rica 56 4.3 45 4.6

Source: World Economic Forum: Global Competitiveness Report

PRIORITY: RAISING PRODUCTIVITY LEVELS

Key Initiative:

• The National Productivity Council is to be reconstituted shortly. The Council has a mandate to promote and

develop greater productivity and quality awareness in Trinidad and Tobago

The NPC will advise Government on the formulation of policies and strategies on all aspects of productivity, quality and competitiveness; and identify constraints to

improvements in productivity, quality and competitiveness and propose corrective action

PRIORITY: SUPPORT FOR ENTREPRENEURS AND BUILDING THE CAPACITY OF MSMES

In the Western Hemisphere, there are an estimated 200 million business units, 120 million of which are micro, small and medium enterprises (MSMEs).

Of these MSMEs, which generate between 50 and 70 percent of jobs in the region, more than a third are headed by women, while about 25 percent are created by entrepreneurs under 35 years of age.

With an average life of only 14 months, most of them operate in the informal sector. In LAC, they generate less than 5 percent of exports of goods and services and only one third have the capacity to engage in international trade of goods and services.

Source: OAS

• Innovation and entrepreneurship are now considered the new engines of job creation, productivity, competitiveness and economic and social prosperity

PRIORITY: SUPPORT FOR ENTREPRENEURS AND BUILDING THE CAPACITY OF MSMES

Key Initiatives:

• Formulation of the Business Incubation Policy for Enterprise Development to accelerate the development of new micro and small

entrepreneurial and innovative businesses, and improve their viability and competitiveness. The Policy will be implemented through a

Business Incubation Programme

• Revision of the MSE Policy for Trinidad and Tobago and the accompanying legislation. The Policy is expected to be completed and

commence implementation in 2011/12

PRIORITY: PRUDENT ECONOMIC MANAGEMENT AND IMPLEMENTATION OF A VIABLE

DIVERSIFICATION STRATEGY

• Prudent macroeconomic management that ensures inflation and exchange rate stability and the maintenance of sound public finances contribute to stable domestic conditions which raises investor

confidence and enhances the prospects for increased investment, both domestic and foreign

• Economic policy must also promote greater integration in the global economy. A more global orientation will expand opportunities for more FDI (in terms of both capital and expertise), new exports and for the absorption of foreign technological advances

• Beyond the issue of making existing industries, systems and clusters competitive, we must find new sources of growth and new ways of generating wealth. A viable diversification strategy must target new investments in industries higher up the knowledge and technology value chain and high export diversification, in particular

PRIORITY: PRUDENT ECONOMIC MANAGEMENT AND IMPLEMENTATION OF A VIABLE

DIVERSIFICATION STRATEGYKey Initiatives:

Establishment of:

- The Ministerial Council for Economic Development, chaired by the Prime Minister which will oversee the economic development process

- The Economic Development Board which has an advisory and implementation role in the strategic management of the economy. The core mandate of the EDB is to develop and implement a holistic and competitive innovation policy that will advance diversification efforts

- The Council for Innovation and Competitiveness which has a mandate to improve Trinidad and Tobago’s competitiveness by identifying ways in which our global image as captured by global indices can be improved

- The International Business Centre which is a key part of the strategy for building a competitive business environment. The IBC will work with Eteck and TDC

PRIORITY: STRENGTHENING THE INSTITUTIONAL AND REGULATORY

ENVIRONMENT• Countries with an efficient regulatory framework tend to attract

more businesses

• The regulatory framework must contribute to investor confidence and the enabling environment for expanding entrepreneurial

capacity, investment in new business and the conduct of business operations

Country Ease of Doing Business Rank 2011 (out of 183 countries)

Singapore 1

Antigua and Barbuda 64

Jamaica 81

St. Kitts and Nevis 87

Dominica 88

Grenada 92

Trinidad and Tobago 97

Source: IFC Doing Business Report 2011

PRIORITY: REGULATORY ENVIRONMENT

Indicator Rank (out of 183 countries)

Ease of Doing Business 97

Starting a Business 74

Dealing with Construction 85

Registering Property 171

Getting Credit 32

Protecting Investors 20

Paying Taxes 91

Trading Across Borders 51

Enforcing Contracts 169

Closing a Business 183

Source: IFC Doing Business Report 2011

PRIORITY: REGULATORY ENVIRONMENT

Key initiatives:

• Launch of the Single Electronic Window (SEW) branded as TTBizLink to assist in reducing the number of the length of time to secure approvals from Government Agencies

• Establishment of the International Business Centre (IBC) that will form part of the institutional structure designed to create a new thrust in investment promotion

• Development and implementation of the Investment Policy 2011-

2015. The Policy will be finalised before the end of 2011

• Development and implementation of the National Export Strategy . The draft Strategy will be developed by June 2012

IMPROVING THE BUSINESS ENVIRONMENT

Key initiatives:

• Increase in the Wear and Tear Allowance for the Manufacturing Sector from 10% to 25%

• Expansion of the Research and Development Facility at the Business Development Company. Grants to single projects have increased from $100,000 to $500,000 and for business alliances of two or more companies from $200,000 to $1 million

• Creation of an Innovation Financing Facility with an initial capital of $10 million

IMPROVING THE BUSINESS ENVIRONMENT

PRIORITY: CONTINUED MAINSTREAMING OF GENDER

• Studies have shown a close connection between economic performance and the degree to which women are integrated in the productive activities and the decision making processes of their societies

• The integration of women allows for greater efficiency in the allocation of resources and an expansion of the pool of talents and skills available

PRIORITY: CONTINUED MAINSTREAMING OF GENDER

Key Initiatives:

• Elimination of all forms of discrimination against women through Legislative and Policy Review and Amendment

• Strengthening of the social service delivery sector and other relevant sectors to enhance men and women’s welfare

• Promotion of public awareness on gender issues through education campaigns

• Review of the curriculum to provide education, awareness, support and guidance to young persons, particularly girls, on reproductive health and life decisions.

PRIORITIES OF THE MINISTRY OF PLANNING, ECONOMIC AND SOCIAL RESTRUCTURING AND

GENDER AFFAIRS

1. Covert Manifesto into a National Plan in two phases:

• 2011 - 2014• 2014 - 2017

2. Identify a national agenda of priorities and facilitate linkages with local government priorities and community initiatives for the 2011-2012 FY

3. Align Ministerial Agendas for high impact with the framework of a sustainable development strategy

4. Strengthen the national data base and information management system to support evidence-based policy making and decision support

PRIORITIES OF THE MINISTRY OF PLANNING, ECONOMIC AND SOCIAL RESTRUCTURING AND

GENDER AFFAIRS

5. Develop a national land use policy to support a sustainable development agenda

6. Facilitate and fuel an innovation-driven economy by specific initiatives and collaborative action with the private sector

7. Strengthen project management capability to ensure efficiency, effectiveness and high performance in the execution of the PSIP

8. Reform Town and Country Planning

Thank You