Syndicate content

competitiveness

The essentials of a manufacturing ecosystem

Aref Adamali's picture

Value addition through manufacturing has been a major focus of economic policymakers across the world, and at times with remarkable success, most famously in East Asia. Initial ‘Asian miracles’ in places like South Korea have since been eclipsed by the meteoric rise of manufacturing in China, which has grown its exports in manufactures by 18 percent a year over the past 10 years, compared to a global average of 7 percent (ITC Trade Map data).

'Flying geese'
 
Most countries generally seemed to follow a basic pattern, initially establishing manufacturing credentials in light manufacturing, such as in textile and apparel, but then in time moving on from such products to higher-value-added and more complex products. As they moved on and up, they opened space for other countries to move into the initial entry products, following the so-called ‘flying geese’ model of division of labor.





There have been noticeable absences though, with not all regions having moved into manufacturing. This is partially the case with Central and South America, but most strikingly with Sub-Saharan Africa.  
 
What can be done to support countries in their quest to deepen their manufacturing sectors, and extract the jobs and technological development that this can offer? How can they develop the kinds of deep and comprehensive manufacturing ecosystems that have enabled China to maintain investment despite fast-rising labor costs?

Can other cities be as competitive as Singapore?

Sameh Wahba's picture
 Joyfull/Shutterstock
Photo: Joyfull/Shutterstock
Singapore is an example of one of the most competitive cities in Asia and in the world. Many, many other cities want to be the next Singapore. In fact, Singapore has been so successful that some believe that its success cannot be emulated. They forget that in the 1960s, Singapore faced several challenges – high unemployment, a small domestic market, limited natural resources, not to mention that most of the population lived in overcrowded unsanitary conditions in slums. Challenges that would sound very familiar to a large number of cities in the developing world.

And so, what better place than Singapore for the Asia Launch of the Competitive Cities for Jobs and Growth: What, Who & How report. The World Bank Group, along with the Centre for Liveable Cities and International Enterprise Singapore co-sponsored the launch as part of Urban Week held in Singapore from 8-11 March, 2016. The roundtable was attended by over 100 delegates representing cities from 23 countries.

The competitiveness potential for cities is enormous. Almost 19 million extra jobs, annually, could be created globally if cities performed at the level of the top quartile of competitive cities. Of this potential, more than 1/3, i.e. equivalent to an additional 7 million jobs, comes from cities in East Asia. Between 2000 and 2010, nearly 200 million people moved to East Asia's urban centers – these people will need jobs. Where will these jobs come from? How will they be generated?

Competitive Cities: Changsha, China – coordination, competition, construction and cars

Z. Joe Kulenovic's picture

Cites are the heartbeat of the global economy. More than half the world’s population now resides in metropolitan areas, making a disproportionate contribution to their respective countries’ prosperity. The opportunities and challenges associated with urbanization are quite evident in the world’s most populous country, whose cities are among the largest and most dynamic on Earth. To better understand what a thriving metropolitan economy looks like in the Chinese context, our Competitive Cities team selected Changsha, the capital of Hunan Province, for inclusion among our six case studies of economically successful cities, as the representative of the East Asia Pacific Region.  
 
As recently as the turn of the millennium, Changsha’s economy was still dominated by low-value-added, non-tradable services (e.g. restaurants and hair salons) – an economic structure commonly seen today in many low- to lower-middle-income cities. Since then, Changsha has achieved consistently high, double-digit annual growth in output and employment, despite its landlocked location and few natural or inherited advantages, such as proximity to trade routes or mineral wealth. With per capita GDP surging from US $3,500 in 2000 to more than US $15,000 in 2012, Changsha has accomplished a feat so many other World Bank clients can only dream of: leapfrogging from lower-middle-income to high-income status in barely a decade, and an economy now comprised of much more sophisticated, capital-intensive industries. 

  

Photos via Google Maps

We took a closer look at the success factors behind this city’s dramatic growth story, and what lessons its experience may hold for cities elsewhere, especially in terms of (1) how to overcome coordination failures and bureaucrats working in silos and (2) how to ensure a level playing field for all firms in the city (that is to say, competition neutrality), even in industries with a strong SOE presence – something still not commonly seen in China these days.
 
Changsha’s (and Hunan’s) growth has clearly benefitted from a highly conducive national macroeconomic and policy framework, including a plan entitled The Rise of Central China, aimed at spurring development in areas beyond the country’s booming coastal regions. This and other initiatives provided for the removal of investment restrictions, more favorable tax treatment, and enhanced infrastructure and connectivity to coastal commercial gateways. China’s massive stimulus plan in 2009 (in response to the global financial crisis and recession) jump-started construction activity in the country, providing further impetus to one of Changsha’s principal industries, construction machinery and equipment manufacturing. And national government interventions in earlier decades – especially the establishment of dedicated research institutes – provided a critical contribution to Changsha’s accumulation of expertise in such disciplines as machinery or metallurgy.
 
Notwithstanding these national initiatives, responsibility for local economic development in China is highly decentralized, with municipal government leaders directly tasked with achieving GDP growth and tax revenue targets. Municipal governments also have rights over almost all land in cities, which can be leased or used as collateral to fund local infrastructure. In Changsha, municipal authorities used these prerogatives to improve their city’s economic competitiveness.

Effective city competitiveness: 10 lessons learned in the Philippines

Hans Shrader's picture



Maybe it's just easier to think that the keys to economic growth lie at the national level of governance – where monetary and fiscal policies, national law and development strategies are conceived and debated. Certainly national policy is important, but it is rarely where entrepreneurs have their first experience interacting with law and policy.

The city is where people’s ideas create business, where people work and where the bustle of the economy comes alive. The city is where an entrepreneur will first interact with systems that are ostensibly created to attract and support business investment and growth.

Cities can and do engage in reforms to help improve their economic competitiveness. Often this includes the identification of a business sector deemed competitive and some strategy on how to do it better. Improved competitiveness also can include investment in more efficient transportation systems, better access to utilities and services, improved tax policies, better zoning, infrastructure investment and investment in skilled labor. While working on these complex policy and investment opportunities is rational, it often takes time to do the analysis necessary to identify the best opportunities – and it takes much longer to actually see the rewards. 

Fortunately, there is a reform that cities can do almost immeduiately, and at low cost, to help support business development and improve the business environment: business entry simplification. 

The Philippine Experience & Lessons Learned

In decentralized economies like the Philippines, cities play an important role in business registration. In fact, almost of one-third of the country’s business registration steps fall under the responsibility of city-level leadership.

In working with Philippine cities to reform dated, cumbersome, and confusing business registration requirements, a World Bank Group team was able to help its clients reduce registration steps from an average of 41 to just three. Cities also saw an average spike in new business registration of around 20 percent in the first year after the implementation of reform.

Stuck on the periphery of international trade and global value chains

Daria Taglioni's picture
Firms that are able to access and use the Internet, mobile telecommunications and other digital technologies are much more likely to export, to export to more destinations, to become part of global value chains (GVCs) and to connect to and survive in the global marketplace. They also grab a larger slice of a country’s total exports, and their products tend to be more diverse.

In Jordan, for example, the use of ICT and digital technologies affects firms’ export performance across multiple dimensions (figure 1) – share of exports, sales, market share and survival. This trend can be seen in other developing countries as well, including Chile, India, Indonesia, Peru, South Africa, Thailand and Ukraine.
 
Figure 1. Jordan: Performance of technology-enabled vs. traditional exporters (Source: eBay, 2014)

Yet, as the 2016 World Development Report Digital Dividends highlights, despite the many individual success stories and the rapid spread of digital technologies, aggregate effects on development, growth, jobs, and services of low-income developing countries (LIDCs) is lagging. The lack of ICT capacity and access is often most evident in limiting the opportunities of small- and medium-enterprises (SMEs), as illustrated in the World Bank-OECD report Inclusive GVCs.

Play the 'Competitive Cities' game: See whether you're a guru of urban competitiveness

Juni Tingting Zhu's picture

To start the new year, I've designed a 10-question game to recap some of the major findings of our flagship report, “Competitive Cities for Jobs and Growth: What, Who and How.”

The report, which was launched at at a World Bank conference in Washington on December 10, 2015, has been gaining wide recognition in the news media. Positive coverage has included analyses in Citylab (edited by urbanologist Richard Florida) and in Citiscope (edited by urbanologist Neal Peirce), as well as an essay in The Huffington Post by Marcelo Giugale, senior economic advisor in the World Bank Group's practice group on Equitable Growth, Finance and Institutions (EFI).

This short 3-minute game features many of the central themes of the Competitive Cities initiative.  Please click on  this link – http://sgiz.mobi/s3/The-Competitive-Cities-Game – to start the game.





For more information about the Competitive Cities initiative at the World Bank, please visit: http://www.worldbank.org/en/topic/trade/publication/competitive-cities-a...  

What’s next for the Competitive Cities initiative: 'To travel far, let's travel together'

Ceci Sager's picture



“I wish that I had had this [report] when I started. . . . It has some great things that we found out over a long period time 
–  in many cases, through trial and error. And so, when I read it, I said, 'Wow, we are doing these things, but it did take us awhile to buy into these things.' It is going to be very informative to cities around the worlld.” 
– Tracey A. Nichols, Director of Economic Development, City of Cleveland


The World Bank Group launched the Competitive Cities report on December 10 – “Competitive Cities for Jobs and Growth: What, Who and How,” which represents almost two years of research and analysis to put together a reliable, comprehensive and unified body of work. It is aimed primarily to help cities formulate and implement economic development strategies, and it is intended to be used by city leaders  themselves.
 
The report was launched jointly by the senior directors of two Global Practices at the Bank Group: the Trade and Competitiveness and the Social, Urban, Rural and Resilience practices. The roundtable discussion included academics, policymakers, senior World Bank advisors, and representatives from the private sector. The Bank Group's stately Old Board Room was filled to overflowing, and the audience was particularly appreciative of the video animation summarizing the central ideas within the Competitive Cities report. The twitter feed associated with the event (#competitivecities) was inundated with live tweets. Supportive analyses in the news media – for instance, in the Huffington Post by Marcelo Giugale and at CityLab by Richard Florida – focused supportive news coverage on the event.

The launch of the report is much more than a flash in the pan. The report itself is only the start: What follows is the rollout, the active dissemination to regional task teams and city leaders, and the setting-in-motion of the findings of the report, which focuses on sub-national growth and job creation. These are some of the events we have planned:

  • Events in the various World Bank Group regions, to share the general framework and also to customize the findings of relevance to each specific region.  So far, we are considering events in Singapore, Sydney, Dar Es Salaam and potentially cities in the Middle East, North and West Africa, and in the Caribbean. If your city is interested in hosting a regional event, we would be pleased to hear from you.
  • A three-day interactive executive training course on competitive cities, which is aimed at city mayors and economic development advisors to cities.
  • An operational guide to help configure competitive cities into World Bank lending projects and advisory services, including deep dives for regional and country task teams. Let us know if you’re particularly interested in hosting such a training session in your region.

Growth and development: Why openness to trade is necessary but not sufficient

Selina Jackson's picture
Photo © Dominic Chavez/World Bank


We are experiencing a battle of ideas regarding the state of the global economy and prospects for growth. Larry Summers has been leading the group of economists proclaiming that the world entered an era of secular stagnation since the global financial crisis. On the other end, Standard Chartered Bank and other players have been arguing that we are experiencing an economic super cycle—defined as average growth of around 3.5 percent from 2000-2030—due to strong growth in emerging markets and fueled by a global demographic dividend.

There is not even agreement on the factors that drive global growth and development. While parts of the Americas and Asia just concluded the Trans Pacific Partnership (TPP) and recent World Trade Organization (WTO) agreements on trade facilitation and information technology products show progress is possible, the Transatlantic Trade and Investment Partnership (TTIP) negotiations between the U.S. and the EU remain highly controversial and the upcoming WTO Ministerial in Nairobi will likely underwhelm. 

However, if you look at the facts, the situation is very clear:

Sustaining structural reforms in Africa in good and tough times

Sudharshan Canagarajah's picture



The recently-published
Regional Economic Outlook for Sub-Saharan Africa (SSA) by the International Monetary Fund underscores the enduring view of  international financial institutions that the depth, pace and perfecting of structural reforms needs to continue, not only for competitiveness and growth but also for resilience should external headwinds emerge. The report also presents an important opportunity to further develop this agenda, by the additional treatment of the underlying causes, particularly non-price based ones, and thereby generate a more actionable view of the growth, competitiveness and equality trends so incisively presented in the report.

Does competition create or kill jobs?

Klaus Tilmes's picture

Greater competition is crucial for creating better jobs, although there may be short term tradeoffs.

Job creation on a massive scale is crucial for sustainably ending extreme poverty and building shared prosperity in every economy. And robust and competitive markets are crucial for creating jobs. Yet the question of whether competition boosts or destroys jobs is one that policymakers often shy away from.

It was thus valuable to have that question as a central point of discussion for competition authorities and policymakers from almost 100 countries – from both developed and developing economies – who recently gathered in Paris for the 14th OECD Global Forum on Competition (GFC).

According to World Bank Group estimates the global economy must create 600 million new jobs by the year 2027 – with 90 percent of those jobs being created in the private sector – just to hold employment rates constant, given current demographic trends.
Yet the need goes further than simply the creation of jobs: to promote shared prosperity, one of the urgent priorities – for economies large and small – is the creation of better jobs. This is where competition policy can play a critical role.
 
Competition helps drive labor toward more productive employment: first, by improving firm-level productivity, and second, by driving the allocation of labor to more productive firms within an industry.
 
Moreover: Making markets more open to foreign competition drives labor to sectors with higher productivity – or, at least, with higher productivity growth. Making jobs more productive, in turn, generally increases the wages they command.
 
That’s in addition to cross-country evidence on the impact of competition policy on the growth of Total Factor Productivity and GDP, and the fact that growth tends not to occur without creating jobs. Thus there’s compelling evidence that – far from being a job killer, as skeptics might fear – competition (over the long term) has the potential to create both more jobs and better jobs.



The key question then becomes whether such long-term benefits must be achieved at the expense of short-term negative shocks to employment – especially in sectors of the economy that may experience sudden increases in the level of competition.
 
Progress toward better jobs is driven partly by the disappearance of low-productivity jobs, as well as the creation of more productive jobs in the short run. Competition encourages that dynamic through firm entry and exit, along with a reduction in “labor hoarding” in firms that have previously enjoyed strong market power.
 


Pages