Clusters and regional value chains in the Danube Region

Clusters and regional value chains in the Danube Region

Presentation by Alan PaicHead, OECD Investment Compact for SEEEU STRATEGY FOR THE DANUBE REGION – 2nd Workshop of PA8"Cluster Networking and Development Prospects in the Danube Region“12th and 13th September 2013, VUKOVAR,CROATIA

Overview of the OECD Investment Compact for South East Europe

• Created within the Stability Pact for South East Europe in 2000• A regional programme to support governments to increase growth, investment

and employment through targeted business climate reforms

Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo*, the Former Yugoslav Republic of Macedonia, Republic of Moldova, Montenegro, Romania and Serbia

• Implementation of the “SEE 2020 strategy”, a roadmap which has been adopted at the South East Europe Ministerial Conference in November 2011.

• Smart growth - Support to innovation• Sustainable growth - Support to SME Policy• Integrated growth - Support to free trade under CEFTA2006

Geographical coverage

Areas of work

MethodologyPolicy

assessmentPrioritisation of

reformsSupport for

implementation

Mission

*This designation is without prejudice to positions on status, and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo declaration of independence.

Next Generation Competitiveness Initiative

ObjectiveSupport competitiveness of clusters in South East Europe by removing barriers to higher value-added investment and monitoring commitments.

Identify sectors and working groups Understand barriers to higher-valued added investment

Methodology

Identify 3 regional sector-specific working groups comprised of Western Balkan clusters, businesses and government officials

Assess the barriers to higher value-added investment both intra-regionally and externally to the Western Balkans

Transfer policy tools and actions to enhance the competitiveness of 3 sectors through pilot projects

Geographic coverage

4

Danube Macro-region

Geographic coverage of Next Generation Competitiveness Initiative

Analysis of export performance and demand growth reveals relative strengths in the Danube region in manufacturing…

-2% 0% 2% 4% 6% 8% 10%

-5%

0%

5%

10%

15%

20%

25%

114772%

81435%

134381%

153334%

10261%

13926%

52775%

126248%

31996%

26437%

267893%

58306%

116574%

33049%

20674%

120173%

Average annual growth rate WB Average annual growth rate EUSDR

Average annual growth in world demand

Aver

age

annu

al g

row

th in

WB

and

EU

SDR

expo

rts

…and in services

-5% -3% -1% 1% 3% 5% 7%

-5%

0%

5%

10%

15%

20%

25%

30%

76609%

89102% 8733%

8268%

9190%

26816%

20950%25040%

94569%2421%

Average annual growth in world demand

Aver

age

annu

al g

row

th in

WB

and

EUSD

R ex

port

s

Supply Chains and Revealed Comparative Advantage

7

An RCA higher than 1 implies that country c has a RCA in industry k. For example, an economy has a RCA in exports of intermediate food products, if its

share in world exports is greater in intermediate food products than in overall manufacturing.

ManufWorld

Manufc

kWorld

kc

X

X

X

X

X

RCAkc

,

,

,

,

,

Market share of country c in world exports in industry k

Market share of country c in world exports in manufacturing

Revealed comparative advantage (RCA) captures relative trade specialisation dividing an industry market share by the manufacturing market share for exports (or imports):

The RCA matrix helps identify economies’ positions in supply chains

No import specialisation in intermediate products

RCA in intermediate good exports

Import specialisation in intermediate products

No evidence of supply chains

First stage supply chains

Final stage supply chains

Intermediate stage supply chains

RCA in final good exports

Source: OECD (2012)8

Example 1: Austria

95

0

5

5,254,860.00

7,754,000.00

5,622,746.002,412,440.00

17,199,000.007,710,675.00

8,099,356.00

6,217,273.00

11,984,950.001,144,190.00

1,655,196.00

9,000,000.001,000,000.00

223,927.003,000,000.00

No Evident InternationalSupply Chains

First StageSupply Chains

Intermediate StageSupply Chains

Final StageSupply Chains


RCA in intermediate goods exports

Import specialisation in intermediate goods

No import specialisation in intermediate goods

Example 2: Hungary

105

0

5

3,906,086.00

1,474,166.00

3,801,742.00

7,810,341.00

11,897,527.00

401,866.00

1,040,460.00

4,600,000.00

562,428.00

914,230.00

1,600,000.00 217,445.00









Example 3: Croatia

118

6

4

2

0

2

4

6

8

283010.88

299621.02

694014.41290852.21

93466.63

128779.99235670.24

4712.46

576728.61641700.60

579419.99

334609.20





RCA in final goods exports


RCA in intermediate goods importsNo RCA in intermediate goods imports

Example 4: Serbia

124

3

2

1

0

1

2

3

4

352580.75105161.79

790686.83181245.32

269691.91

96091.08

134926.64

153675.05

65830.71

542308.7170822.23801187.89

Manufacturing n.e.c.

No import specialisation in intermedi-ate products




Import specialisation in intermediate products




Example 7: Romania

135

0

5

1821916

25955834390000

15657052541797

5659108

3900409

150109

647834

12000003893294646

1400000









The Danube region economies present supply chain complementarities in selected sectors

Economies’ positions in supply chains

14

First stage of supply chains

Intermediate stage of supply chains

Final stage of supply chains

Food, Beverages and Tobacco RS BG, MD BG, RO, HR, BA, MD, ME

Textiles, Apparel, Leather and Footwear RO BG, RO, BA, HR, MD, RS

Wood and Products of Wood and Cork BG, SK, CZ, RO AT, SI, BA, HR, ME, RS BAPulp, Paper, Paper Products, Printing and Publishing AT, CZ, SI, BA, HR, RS CZ, SI, BA, RSCoke, Refined Petroleum Products and Nuclear Fuel HR BG Chemicals and Chemical Products SKRubber and Plastics Products SK, SI, RO, AT, CZ, HU, RS AT, SI, CZ, HU, SK

Other Non-Metallic Mineral Products SK, SI, AT, BG, CZ, HU, BA, HR, MD, RS BG, AT, CZ, SI, RO

Basic Metals RO, SK, BA, ME AT, SI, BG, CZ, RS

Fabricated Metal Products BA AT, SI, CZ, RO, SK, HR, RS CZ, RS

Machinery and Equipment, n.e.c. SI AT, HU, CZ, RO, SK CZ, HUOffice, Accounting and Computing Machinery CZ CZElectrical Machinery and Apparatus, n.e.c. HR, RS SK, SI, RO, HU, AT, BG,

CZ, MD HURadio, Television and Communication Equipment HUMedical, Precision and Optical Instruments Motor Vehicles, Trailers and Semi-Trailers BA CZ, HU, RO, SK, AT SI

Other Transport Equipment AT, CZ, SI, HU, RO

Manufacturing n.e.c.; Recycling AT, HU, RO CZ, SK, SI, HR, RS SI, BA, MD

Examples of pilot projects to be implemented

• Cluster policy review according to best practice• Skills gap analysis for one sector across the Western Balkans

potentially complemented by an internship scheme• Developing a regional investment promotion strategy for a

specific sector. • A region-wide Triple Helix partnership project which would result

in concrete innovative products and services;• Identifying non-tariff barriers to trade in the sector which would

allow better flow of goods and services across the region, and design measures to remove those barriers;

• Improving mobility of professionals across the region to allow skill pooling,

Moving from lower to higher value-added activities

Expected outcomes of the project

• Connect clusters, develop regional value chains and strengthen the competitiveness of key economic sectors This involves expedited implementation of policy reforms with a focus on three

specific sectors deemed to possess comparative advantage, and reinforcing that advantage in the global marketplace.

• Positive macro-economic benefits: improved trade performance (through increased export sophistication), increased government receipts from a more productive business sector, and positive developments as regards labour market outcomes (which would in turn

have positive impacts on government accounts).• Officials with enhanced capacity to conduct competitiveness-related reforms;• Enhanced dialogue between the policy makers and the private sector.

Next steps

• Project duration: April 2013 – April 2016

• Financing secured: 5 million euros from EC DG ELARG and OECD

• Project is part of Danuclus within PA 8 of Danube Strategy

• Inclusion of Northern Danube countries Immediately: For expertise and good practice transfer 2014: potential to expand full scope of project through complementary

financing

Thank you for your attention

Alan Paić[email protected]

HeadOECD Investment Compact for South East Europe

Next Generation Competitiveness Initiative in context

20

Sector Specific Sources of Competitiveness (SSSC)

• Identified barriers to sector competitiveness in three sectors with policy recommendations.

• Regional investment promotion for automotive• Internships to address ICT skills• Access to finance for textiles

Regional Competitiveness Initiative (RCI)•Improve competitiveness through innovation and

human capital•Capacity building support via pilot projects•Transfer lessons learned through regional working

groups

Next Generation Competitiveness Initiative (NGCI)•An open, sector-based, regional network of clusters,

businesses and government officials; •Development of transferable policy tools and

actions to sustainably improve competitiveness in specific sectors

• SEE 2020 Monitoring

2010 20122011 201520142013

Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Kosovo*, Montenegro, and Serbia

* This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence

2007 20092008

Roadmap

21 21

Greater time and staff commitment

2013 2014 2015

Analysis and short listing of sectors

Identification of 3 sectors and designation of sector working group membership

Launch of first sector working group

Identification of key constraints limiting sector competitiveness

Design regional pilot projects in each sector working group

Implementation of pilot projects in each sector group

Completion of sector-based pilot projects

Review of pilot projects and extraction of lessons learned

Monitoring of reforms as a result of sector-based pilot projects

The OECD is an international organisation with 34 member countries:

• USA, Canada, Japan, Australia, New Zealand, Europe (20 of EU-27, Switzerland, Norway, Iceland)

• Chile, Mexico, Israel, Korea, Turkey

…and a growing number of key partners• Brazil, Russian Federation*, India,

Indonesia, China, South Africa

totaling more than 80% world GDP and 64% of the world’s population.

The OECD’s mission is to promote policies that will improve economic and social well-being*in accession process

The OECD at a glance

Who we are Sharing of good policy practices, peer review and policy dialogue in:

• Anti-corruption• Competition and Financial markets• Corporate governance• Development• Economic growth• Education• Environment• Employment and labour markets• Governance• Health and social care• Industry and Entrepreneurship• Investment• Private Sector Development• Regional, Urban and Rural development• Science, Technology and Innovation• Tax policy• Trade, etc.

Setting international standards on domains ranging from agriculture and tax to the safety of chemicals.

What we do

The Investment Compact supports competitiveness through work on investment, free trade and SME policy

Political support

Policy dialogue Promoting reform

Assessment Strategy Support to implementation

Value-added investment

Investment Ministerial Conference

South East Europe Investment Committee

• Innovation WG•Human capital

WG•Sector specific

WG

Investment Reform Index(monitoring SEE 2020) Next Generation Competitiveness

• Pilot projects to remove sector specific barriers in innovation, skills, trade, investment policy, access to finance,...

Industrial PolicyFacilitating free trade

CEFTA Ministerial

•Budapest round table for non-tariff barriers to trade

•CEFTA subcommittees

•Non-tariff barriers

•Trade in Services• Investment

concentration

SME policy and entrepreneurship

South East Europe Investment Committee

•SME policy working group

SME Policy Index (monitoring Small Business Act and EDIF)

SME reform prioritisation (EDIF)

SME reform support to implementation (EDIF)

Example 5: Bosnia and Herzegovina

2410

5

0

5

10

159794.88

185455.65

326340.75 51223.62

104768.4450380.36

293.31139918.60

1580.14

27532.49

140910.94333774.98








Example 6: Montenegro

25

10

5

0

5

10

146694.2211639.69

33607.96








Example 8: Moldova

268

6

4

2

0

2

4

6

8

40247.65

70395.29

24576.61

22387.305214.64

196981.62212257.65








Documents

Clusters and regional value chains in the Danube Region