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Enterprise and Industry Directorate-GeneralEnterprise and Industry
Directorate-General
RESER Conference14th September 2007
Services in the context ofEU policy for Enterprise and Industry
Ronald MackayDG Enterprise and Industry
European Commission
Enterprise and Industry Directorate-General
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Enterprise and Industry Directorate-General
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Topics of presentation
Main themes
• Challenges to industry• Communication on industrial policy 2007 • Innovation in services
• Interlinkage industry and services– Services as inputs to industry– Industry as service provider
• Productivity and competitiveness
• Policy sreeening in service sectors
• Key messages
Enterprise and Industry Directorate-General
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Challenges to industry
Mid-term review of industrial policy COM(2007)374
– Stocktaking, launch of new initiatives– Programme of work to 2009
Challenges to industry• Globalisation• Rate of technological advances• Energy and climate change
Implications for the service sector
Communication on industrial policy (2005)– Integrated approach (Horizontal and sectoral initiatives)– Concrete programme of work
Enterprise and Industry Directorate-General
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Programme 2007 - 2009
Industrial Policy Initiatives
Horizontal (e.g.)– Sustainable industrial policy– Intellectual property– Structural change (anticipation)– Industry and services (policy screening)
Sectoral (e.g.)– European food industry– Electrical engineering– Space; defence and security– Pharmaceuticals
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Innovation in services (1)
Expert Group FindingsCommission paper SEC(2007)1059
– Services companies, generally, do not innovate less than manufacturing companies but great differences exist between knowledge intensive and other services.
– Lower percentage of all service sector firms (34.0%) as opposed to manufacturing firms (39.3%) are technical innovators.
– The exception are KIBS firms, which are more likely than manufacturing firms to introduce either a product or process innovation (51.5 %)
• Fazit: Service firms do innovate, but in a different way.
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Innovation in services (2)
Implications
• Policy instruments need to recognise the specificity of innovative companies in services
• The strong heterogeneity within services sectors has implications for policy
• A distinction based on R&D intensity may be more adequate than services/manufacturing ?
• Innovation support schemes need to focus on fast growing companies (not only in the service sectors)
Enterprise and Industry Directorate-General
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Innovation in services (3)
European Innovation Platform for Knowledge Intensive Services
• pilot action that will test new forms of integrated support mechanisms for knowledge intensive services with high growth
• operational learning platform where such new policy approaches in support of innovation in services can be tested
Aims• to foster technological as well as non-technological innovation
(organisational innovation) in services • to practically implement such good practice examples and to
further develop them in support of knowledge intense services
Enterprise and Industry Directorate-General
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Structural change (1)
Structure of industry in Europe
• Rate of change: too slow or too fast?• EU manufacturing remains specialized in medium-tech
sectors and has not taken advantage of the fast growth of certain high tech sectors.
• European businesses have not fully exploited either the opportunities offered by ICT technologies.
• Also, within sectors, the EU is comparatively bad at reallocating resources to the most productive companies
• Anticipation (getting ready, not forecasting) and development of capacity to change
• Adjustment costs and the European Globalisation Adjustment Fund
Enterprise and Industry Directorate-General
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Structural change (2)
Interlinkage industry and services
• Service provision is mainly local. Industrial restructuring has an impact on the location, or relocation, of employment in the service sector. Will industry continue to procure essential business services close to where it is located?
• Does the service sector have the capacity to create alternative employment in areas affected by industrial restructuring?
• Impact of outsourcing/offshoring: Many services which were previously considered non-tradable are being increasingly codified, standardised, and suitable for delivery at a distance. (Digital Delivery)
• What framework conditions have a positive, and which have a negative impact on company strategy?
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Industry and services (1)
Importance of services as inputs
Reliance of industry on wide range of service inputs
But • Relative absence of quality standards • Lack of market transparency • High transaction costs• Risk of dissatisfaction with service delivered• Need for procurement of business related services based
on based on more objective criteria and best value for money
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Services as intermediate inputs to industry
Table II.9: Cost structure of EU sectors (% of production value) (2001)
Inputs Sector
Primary Manuf. Utilities and construction
Market services
Public services
Labour Other Total
Food products and beverages
27.1 30.2 1.8 13.2 0.8 15.5 11.5 100
Chemicals and chemical products
2.0 43.5 2.9 17.6 1.4 18.0 14.6 100
Office machinery and computers
0.0 64.4 0.6 14.5 0.7 13.2 6.6 100
Electrical machinery and apparatus n.e.c.
0.2 50.7 1.1 13.4 0.7 26.4 7.5 100
Radio, TV and communication equipment
0.0 54.5 1.0 19.1 1.0 19.3 5.1 100
Source: EU Industrial Structure 2007: calculated from Eurostat’s Input-Output Tables.
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Industry and services (2)
Manufacturers are also service providers
• Manufacturers build “products” but their clients want “solutions”
• Manufacturing companies increasingly provide services in conjunction with their product.
• Increased demand for complex systems (e.g. satellite system, mobile phone base station, transportation systems…)
• Business models (e.g. Public Private Partnerships, Build-Operate-Transfer)
• They are confronted with the same administrative and regulatory obstacles to trade as service firms, both within the EU and internationally.
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Servo-industrial sector (Austria)
ServoindustriellerSektor
Kernkonzept
Produzierender Bereich
Fachverbände der
Bergbau und Gewinnung von Steinen und ErdenSachgütererzeugungEnergie- und WasserversorgungBauwesen
+ industrieorientierteTeile des Dienstleistungssektors
Kernkonzept
Produzierender Bereich
Produzierender Bereich
Erweitertes Konzept der Industrie
Bergbau u. Gewinnung v. Steinen u. Erden
Sachgütererzeugung
Energie- u. Wasserversorgung
Bauwesen
Produzierender Bereich
& Industrienahe Dienstleistungen
Sachgüter-erzeugung
Sachgütererzeugung
Erweitertes Konzept der Industrie
& Produktionsorientierte Dienstleistungen
Anm.: Die Industrienahen Dienstleistungen beinhalten die Vermietung beweglicher Sachen ohne Bedienungspersonal (NACE 71), die Datenverarbeitung u. Datenbanken (NACE 72) sowie die Erbringung v. unternehmensbezogenen Dienstleistungen (NACE 74). Die Produktionsorientierten Dienstleistungen umfassen: 1/3 Handel, Reparatur v. Kfz u. Gebrauchsgütern; 1/3 Beherbergungs- u. Gaststättenwesen; 1/3 Verkehr u. Nachrichtenübermittlung; 1/2 Kredit- u. Versicherungswesen; 1/2 Industrienahe Dienstleistungen erweitert (Realitätenwesen [NACE 70], Forschung u. Entwicklung [NACE 73]).Quelle: IWI (2007)
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Servo-industrial complex
Manufacturing Production Extended Industry
Servo-industrial
sector
GDP Germany 19,30 23,96 30,95 37,19
France 12,64 17,88 25,51 31,77
Austria 16,96 24,01 31,09 38,62
UK 12,37 20,12 32,73 40,67
Employment Germany 18,59 23,74 32,77 39,78
France 15,57 22,70 32,89 41,23
Austria 16,19 23,69 32,49 42,49
UK 11,98 17,41 31,32 42,28
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Services in the economy
DG ECFIN study 2007
Sources:
• EUKLEMS
• COMTRADE
Industry classification:
• NACE @ 2 or 3 digits
Usual caveats about methodology: how reliable are the figures?
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Manufacturing and tradeable services
% total value added
% total employment
World export growth
Food and beverages 15 1,86 2,25 7,3
Chemicals 24 1,94 1,67 12,2
Rubber and plastics 25 0,99 0,61 8,2
Basic metals 27 0,73 0,83 12
Fabricated metal 28 1,82 1,58 8
Machinery 29 2,08 0,97 8
Electrical machinery and apparatus, nec 31 0,9 0,6 7,5
Radio, television and comm. equip. 32 0,52 0,31 8,5
Medical, precision and optical instruments 33 0,57 0,18 10,6
Motor vehicles 34 1,42 1,13 7,5
Electricity, gas and water supply E 2,17 0,59 20,8
Other business activities 74 6,97 13,09 7,2
Other service activities 93 0,72 1,28 70,7
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Labour productivity performance
(growth during period 1995-2004 in %)
EU25 US
50 - Sale, maint. and repair of motor vehicles 7,2 75,5
51 - Wholesale trade 27,2 52,8
52 - Retail trade 14,6 58,1
H – Hotels and restaurants -1,3 11,8
62 - Other air transport 6,6 57,9
63 - Other supporting and auxiliary transport activities -2 42,2
65 - Financial intermediation 46,7 69,4
66 - Insurance and pension funding -13,4 10,3
73 - Research and development -1,6 46,4
74 - Other business activities -7,7 17,1
90 - Sewage and refuse disposal -5,1 37,6
92 - Recreational, cultural and sporting activities 4,3 21,7
93 - Other service activities -11,1 11,8
Enterprise and Industry Directorate-General
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The EU productivity problem
EU market services have contributed relatively little to growth
(Sectoral contribution to business sector productivity growth)
(Source OECD, Scarpetta, 2007)
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
95-00 00-05 95-00 00-05 95-00 00-05 95-00 00-05 95-00 00-05 95-00 00-05
OtherFinancial and business services Trade, transport and communication Manufacturing
France
Germany ItalyUnited Kingdom
United States
EU15
Enterprise and Industry Directorate-General
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Services productivity
A shared problem
• Productivity growth in services lags behind that of manufacturing, but the service sector is already large, and still growing.
• Productivity increases in industrial sectors may have a ceiling, which is determined by the relatively low productivity of service inputs
• Industrial companies employ increasing numbers of people in internal service functions. Their overall productivity growth will reach a limit if they do not tackle the issue of services productivity.
• Services productivity is too important to leave it entirely in the hands of the service providers.
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Initiative on Industry/Services (1)
Rationale
• The cost, quality and productivity of certain service sectors, have an impact on the competitiveness of industry.
• Regulations which affect the performance of professional and other business services, financial services or the retail and distribution sector also have an impact on industry.
• In addition, competitive network industries enhance the competitiveness of industry as a whole.
• Industry is both a user and provider of a growing range of services related to innovative technologies and products.
Enterprise and Industry Directorate-General
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Industry related services
Service sectors with close linkage to industrial sectors
Quality, price and competitiveness of the service sector has impact on competitiveness of many industrial sectors
Examples:• Engineering services• Creative industries (Design, Architecture, Advertising) • Other Business Services• Network services (Distribution, Communications)• Facility Management• Recycling, Waste disposal
Methodology: Same form of competitiveness analysis as applied to the industrial sectors could be applied to these (or other) service sectors
Enterprise and Industry Directorate-General
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Initiative on Industry/Services (2)
Methodolgy
• Identification of key areas of interdependency• Policy screening of relevant service sectors• Identification of obstacles to increased
competitiveness and market failures• Assessment of impact on industry• Assessment of need for intervention
Enterprise and Industry Directorate-General
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Initiative on Industry/Servicesvice (3)
Knowledge
Competition
Regulation
Environment
External Competitiveness
Employment and Geographic dimension
Competitiveness Assessment:
Structural data and indicators:
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Challenges for the service sector
• Provide more inputs to policy development– Industry, innovation, SME, Research– Internal Market, Public procurement, Intellectual property – Trade, Competition
• Emphasise contribution to economic growth and job creation– Lisbon strategy, National reform programmes, Community Lisbon
Programme• Invest in more R&D• Invest in more innovation• Increase productivity• Increase use of standards
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References and links
References and links
• Mid-Term Review of Industrial Policy COM(2007)374http://ec.europa.eu/enterprise/enterprise_policy/industry/index_en.htm
• Innovation in Services SEC(2007)1059http://www.proinno-europe.eu/index.cfm?fuseaction=nwev.NewsReader&news=1918&lang=EN&topicID=90&parentID=0
• EU Industrial Structure 2007http://ec.europa.eu/enterprise/enterprise_policy/competitiveness/2_indics/indics_compet.htm
• Industriebuch 2007Industriewissenschafliches Institut (IWI) Vienna
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The End
Thank you for your attention