““Competitiveness and Economic Growth. An Competitiveness and Economic Growth. An Analysis of Mexico and Korea.”Analysis of Mexico and Korea.”

““Crecimiento Económico y Competitividad. Un Análisis de Crecimiento Económico y Competitividad. Un Análisis de México y Corea.”México y Corea.”

Dr. Alejandro Díaz-BautistaDr. Alejandro Díaz-Bautista

Professor of Economics and Researcher at El Colegio de la Frontera Norte (COLEF)

Profesor Investigador del Colef. Miembro del SNI Conacyt.

adiazbau@hotmail.com

Prepared for the Conference at the Faculty of Economics, University of Colima, April 29-30, 2010. Colima, Colima, Mexico.

Preparado para la Conferencia en la Facultad de Economía de la Universidad de Colima, y para los estudios en Cuenca del Pacífico y APEC en la Universidad de Colima, los días 29 y 30 de abril de 2010.

Korean Korean EconomyEconomy

Economy - Overview:Since the 1960s, South Korea has achieved an incredible Since the 1960s, South Korea has achieved an incredible record of growth and global integration to become a high-record of growth and global integration to become a high-tech industrialized economy. Four decades ago, GDP per tech industrialized economy. Four decades ago, GDP per capita was comparable with levels in the poorer countries capita was comparable with levels in the poorer countries of Africa and Asia. In 2004, South Korea joined the trillion of Africa and Asia. In 2004, South Korea joined the trillion dollar club of world economies, and currently is among the dollar club of world economies, and currently is among the world's twenty largest economies. Initially, this success was world's twenty largest economies. Initially, this success was achieved by a system of close government and business achieved by a system of close government and business ties including directed credit and import restrictions. The ties including directed credit and import restrictions. The government promoted the import of raw materials and government promoted the import of raw materials and technology at the expense of consumer goods, and technology at the expense of consumer goods, and

encouraged savings and investment over consumptionencouraged savings and investment over consumption..

Korean EconomyKorean Economy The Asian financial crisis of 1997-98 exposed longstanding The Asian financial crisis of 1997-98 exposed longstanding

weaknesses in South Korea's development model including high weaknesses in South Korea's development model including high debt/equity ratios and massive foreign borrowing. GDP plunged debt/equity ratios and massive foreign borrowing. GDP plunged by 6.9% in 1998, then recovered by 9% in 1999-2000. Korea by 6.9% in 1998, then recovered by 9% in 1999-2000. Korea adopted numerous economic reforms following the crisis, adopted numerous economic reforms following the crisis, including greater openness to foreign investment and imports. including greater openness to foreign investment and imports. Growth moderated to about 4-5% annually between 2003 and Growth moderated to about 4-5% annually between 2003 and 2007. With the global economic downturn in late 2008, South 2007. With the global economic downturn in late 2008, South Korean GDP growth slowed to 2.2% in 2008 and declined 0.8% Korean GDP growth slowed to 2.2% in 2008 and declined 0.8% in 2009. In the third quarter of 2009, the economy began to in 2009. In the third quarter of 2009, the economy began to recover, in large part due to export growth, low interest rates, recover, in large part due to export growth, low interest rates, and an expansionary fiscal policy. The South Korean economy's and an expansionary fiscal policy. The South Korean economy's long term challenges include a rapidly aging population, long term challenges include a rapidly aging population, inflexible labor market, and overdependence on manufacturing inflexible labor market, and overdependence on manufacturing

exports to drive economic growthexports to drive economic growth..

Mexican Economy 2010 Mexico per capita income is roughly one-third that of the US;

income distribution remains highly unequal. Trade with the US and Canada has nearly tripled since the implementation of NAFTA in 1994. Mexico has 12 free trade agreements with over 40 countries including, Guatemala, Honduras, El Salvador, the European Free Trade Area, and Japan, putting more than 90% of trade under free trade agreements. In 2007, during its first year in office, President Calderon was able to garner support from the opposition to successfully pass a pension reform. The administration passed an energy reform measure in 2008, and another small fiscal reform in 2009.

Mexico's GDP plunged more than 7% in 2009 as world demand for exports dropped and asset prices tumbled, but GDP is expected to post positive growth late in 2010.

The Calderon administration continues to face many economic challenges, including improving the public education system, upgrading infrastructure, modernizing labor laws, and fostering private investment in the energy sector. President Calderon has stated that his top economic priorities remain reducing poverty and unemployment, and creating jobs.

Transformation of the Korean Transformation of the Korean Economy (1945-2003)Economy (1945-2003)

Growth TrendGrowth Trend

Liberationfrom JapaneseColonial Rule

6 Five-Year-Economic- Development Plans

FinancialCrisis

2003P19801962 1970 1995

5,000

10,000

67 87

11,432

7,355

1953

Per Capita (US$)GNI

1990

1945

12,646

OECDMember100(1964)

1,000(1977)

1998

Economic Take-off with Outward-looking Economic Take-off with Outward-looking Development Strategy Development Strategy (1960-80).(1960-80).

Economic Conditions of the early 1960sEconomic Conditions of the early 1960s

CapitalShortage

WeakTechnology Base

UnderdevelopedPrivate Sector

AbundantLabor

StrongEconomic will

High Level ofEducation

?

Working Mechanism of the Outward-Working Mechanism of the Outward-looking looking

Development StrategyDevelopment StrategyEconomic Growth

Reproducti

on

S

ExportPromotion

ManufacturingProcessing

PrivateEnterprises

Government

TechnologyDevelopment

Financial Tax Support

Well-educated Labor force

Foreign TechnologyImports

Capital Good Imports

Raw Material Imports

Foreign Capital Inducement (Economic Aids External Debt)

S

Education & HRD in Korea : AttainmentsEducation & HRD in Korea : Attainments

Quantitative profileQuantitative profile: impressive, well above the OECD : impressive, well above the OECD average average

• Education up to the college level almost universalizedEducation up to the college level almost universalized College Advancement > 80 %College Advancement > 80 %

Net Enrollment for the aged 18~21 = 41%, (No. 5 in the Net Enrollment for the aged 18~21 = 41%, (No. 5 in the World)World)

Superb Superb academic performanceacademic performance: global leader ( PISA): global leader ( PISA)

Size and Composition of Educational Investment (2000) (Unit: %)

OECD AVG KOR U.S. JPN UK Germany

GDP share 5.5 7.7 7.0 4.6 5.3 5.3

Public-financed 4.8 4.9 4.8 3.5 4.5 4.3

Private-financed 0.6 2.8 2.2 1.2 0.7 1.0

OECD, Education at a Glance 2003. Korean figures are for 2003.

Change in Industrial Policies during the Change in Industrial Policies during the 1970s:1970s:

from Light Industry to Heavy and Chemical from Light Industry to Heavy and Chemical IndustryIndustry• Mobilizing Financial

Resources

• Selecting National

Champions (“Chaebol”)

• Accelerating

Competition

Iron and steel

Electronics

Petro-chemical products

Automobile

Ship-building

Machinery

Chaebol (en hangul, 재벌 ) es un modelo empresarial basado en grandes conglomerados con presencia en distintos sectores económicos, que se ha desarrollado en Corea del Sur. Las compañías que presentan esta peculiaridad se caracterizan por su fuerte crecimiento, desarrollo tecnológico, diversificación y una fuerte dimensión empresarial. La palabra en coreano significa "negocio de familia", aunque también se utiliza para referirse a un monopolio.

Changing Industrial Structure:Changing Industrial Structure: from Agriculture to Manufacturing /from Agriculture to Manufacturing / from Light Industry to Heavy and Chemical from Light Industry to Heavy and Chemical

IndustryIndustry

1960 1970 1990 1999 1980

HCI Product

Agricultural Product

Light Industry Product

50%

Wig Automobile SemiconductorTextile

2003

Semiconductor, Mobile Phone, DTV, Display, Automobile, Ship-building, etc.

84.8%

12.4%

2.8%

(ICT, 27.6%)

Changes in Export Commodity Profile

Changes in Development Strategy Changes in Development Strategy (1980-2000)(1980-2000)

Pitfalls of the Government-led Economic Pitfalls of the Government-led Economic DevelopmentDevelopment

• Inefficient Resource Allocation• Macroeconomic Instability• Rising Inequality

Financial Suppressiondue to Prolonged

Government Intervention

High Large Fiscal Deficits

Over-investment in Inflation

1979 : Negative Export Growth for the first time since 1960

1980 : Negative Economic Growth (-3.9%)

Stabilization Policies in the Early 1980sStabilization Policies in the Early 1980s

Budget Freeze/CutZero-Based Budgeting

Budget Freeze/CutZero-Based Budgeting

Phasing-out of Policy Loans and Interest Rate Deregulation

Phasing-out of Policy Loans and Interest Rate Deregulation

Investment Adjustment

Investment Adjustment

Inflation at around 3%

Inflation at around 3%Disinflation Disinflation

Current Account Surpluses

Current Account SurplusesStrong ExportsStrong Exports

GDP Growth of 8% per annumGDP Growth of 8% per annum

High Economic Growth

High Economic Growth

Delayed Economic Reform and Delayed Economic Reform and Financial Crisis of 1997 Financial Crisis of 1997

Increased Vulnerability to External Shocks

IMFRescue Package

• Massive Capital Outflow• Denied Rollover of Short-term External Debt

Continued Government Intervention /

Weak Prudential Regulation

Problemsin the Financial

Sector

South-east AsianCrisis

HighCorporate

Debt Leverage

WidespreadMoral Hazard

Firm Failures and Unemployment, 1996-99Firm Failures and Unemployment, 1996-99

0

5

10

15

20

25

30

1996 0

1

1996 0

4

1996 0

7

1996 1

0

1997 0

1

1997 0

4

1997 0

7

1997 1

0

1998 0

1

1998 0

4

1998 0

7

1998 1

0

1999 0

1

1999 0

4

1999 0

7

1999 1

0

2000 0

1

2000 0

4

(%)

0

5,00

1,000

1,500

2,000

2,500

3,000

3,500

4,000

Overnight inter-bank call rate Unemployment rate

No. of firm failures

Source: Choi(2001), Bank of Korea, and National Statistical Office.

Swift Crisis Resolution and Swift Crisis Resolution and Economic RecoveryEconomic Recovery

Cleaning up Non-performing Loans

Cleaning up Non-performing Loans

AcceleratingLiberalization

AcceleratingLiberalization

Improving Corporate Governance

Improving Corporate Governance

Expanding Social Safety Net

Expanding Social Safety Net

- Early Graduation from the IMF Program- Foreign Reserves of more than USD 200bn in 2004

- Early Graduation from the IMF Program- Foreign Reserves of more than USD 200bn in 2004

Improved External Positions

Improved External Positions

- GDP Growth: -6.7% (1998) 10.7% (1999)- Unemployment: 6.8% (1998) 3.5% (2004)

- GDP Growth: -6.7% (1998) 10.7% (1999)- Unemployment: 6.8% (1998) 3.5% (2004)

Rapid Economic Recovery

Rapid Economic Recovery

- Debt-equity Ratio: 396% (1997) 182 (2002) - No. of Banks: 33 (1997) 20 (2001)

- Debt-equity Ratio: 396% (1997) 182 (2002) - No. of Banks: 33 (1997) 20 (2001)

Stronger Corporate and Financial Sector

Stronger Corporate and Financial Sector

Five-year Economic Five-year Economic Development PlansDevelopment Plans

State-led Planning (1962-76); 1st, 2nd, and 3rd Five-year State-led Planning (1962-76); 1st, 2nd, and 3rd Five-year Economic Development PlansEconomic Development Plans• Suitable for an under-developed, small-sized economy Suitable for an under-developed, small-sized economy

with a relatively simple structurewith a relatively simple structure• Focused on setting up sectoral investment plans and Focused on setting up sectoral investment plans and

mobilizing and allocating domestic and external mobilizing and allocating domestic and external resources to support the implementation of the plansresources to support the implementation of the plans

• Supplemented by annual Economic Management PlansSupplemented by annual Economic Management Plans

Indicative Planning (1977-91); 4th, 5th, and 6th Five-year Indicative Planning (1977-91); 4th, 5th, and 6th Five-year Economic Development PlansEconomic Development Plans• To cope with the growing size and sophistication of the To cope with the growing size and sophistication of the

economyeconomy• Giving a greater role to private initiativesGiving a greater role to private initiatives• Reflecting a growing concern on equity issuesReflecting a growing concern on equity issues• Medium-term Fiscal Plan introduced in the early 1980s Medium-term Fiscal Plan introduced in the early 1980s

to bridge the gap between EDPs and annual budgetingto bridge the gap between EDPs and annual budgeting Not published to the publicNot published to the public Not tightly linked to annual budgetingNot tightly linked to annual budgeting

Strategic Planning (1992-96); 7th Five-year Economic and Social Strategic Planning (1992-96); 7th Five-year Economic and Social Development PlanDevelopment Plan• Addressing strategic issues to be tackled through a concerted Addressing strategic issues to be tackled through a concerted

effort by the government and the private sectoreffort by the government and the private sector• Replaced by the Five-year Plan for New Economy in 1993Replaced by the Five-year Plan for New Economy in 1993

Setting out various reform agenda -- fiscal, financial, and Setting out various reform agenda -- fiscal, financial, and regulatory reforms, accelerated external liberalization, regulatory reforms, accelerated external liberalization, improved social equityimproved social equity

““Planning” effectively abandonedPlanning” effectively abandoned

Organizational Structure of the Organizational Structure of the Planning FunctionPlanning Function

Economic Planning Board (1961-94)Economic Planning Board (1961-94)• ““Super ministry” in charge of both planning and budgetingSuper ministry” in charge of both planning and budgeting• Preparing Five-year EDPs and annual EMPsPreparing Five-year EDPs and annual EMPs• Coordinating economic policesCoordinating economic polices

Head of EPB holding the post of Deputy Prime Minister and Head of EPB holding the post of Deputy Prime Minister and chairing Economic Ministerial Meetingschairing Economic Ministerial Meetings

• Allocating domestic and external resources for economic Allocating domestic and external resources for economic developmentdevelopment

Ministry of Finance (1948-94)Ministry of Finance (1948-94)• Financial market, monetary policy, tax policy, treasuryFinancial market, monetary policy, tax policy, treasury

Ministry of Finance and Economy (1995-)Ministry of Finance and Economy (1995-)• EPB and MOF merged to produce MOFEEPB and MOF merged to produce MOFE• ““Planning” effectively abandoned Planning” effectively abandoned • In 1998, transferred budgeting, prudential regulation, In 1998, transferred budgeting, prudential regulation,

and monetary policy to MPB, FSC, and BoK, and monetary policy to MPB, FSC, and BoK, respectively.respectively.

• Still in charge of coordinating economic policiesStill in charge of coordinating economic policies

Ministry of Planning and Budget Ministry of Planning and Budget (1998-)(1998-)• Responsible for central government Responsible for central government

budgetingbudgeting• Increasing its role in long-term planning Increasing its role in long-term planning

and policy coordination with the and policy coordination with the introduction of MTEFintroduction of MTEF

Economic Growth and Poverty Reduction in KoreaEconomic Growth and Poverty Reduction in Korea

• Before 1997Before 1997

Government-led development

strategies

Export-driven industrialization

Successful birth control

Poverty ReductionPoverty Reduction

Economicgrowth

Decrease in absolute poverty rate

• Since 1997Since 1997

Emerging Issues

• Relative poverty

• Inequality

• Bi-polarization in Income distribution

After the Financial Crisis

Financial Crisis(1997)

Economic Growth and Reduction in Absolute PovertyEconomic Growth and Reduction in Absolute Poverty

• Rapid economic growth contributed to the decrease in absolute poverty rates: “Floating Rapid economic growth contributed to the decrease in absolute poverty rates: “Floating

Effect”Effect”

Economic Growth and Absolute Poverty

IEconomic Growth, Poverty and Inequality in KoreaIEconomic Growth, Poverty and Inequality in Korea

GNP per capita(US$)

Absolute poverty Rate(%)

710 (1965)

14,162 (2004)

41.4 (1965)

under 1~2 (2004)

2626

0

2000

4000

6000

8000

10000

12000

14000

16000

1965 1970 1975 1980 1985 1990 1995 2004

051015202530354045

GNP per capita PPP(US $) Poverty as % of pop

Economic Growth and Absolute Poverty in Korea

Economic Growth, Poverty and Inequality in KoreaEconomic Growth, Poverty and Inequality in Korea

2727

Key Factors for Reducing Absolute PovertyKey Factors for Reducing Absolute Poverty • Active and heavy investment in human and physical Active and heavy investment in human and physical

capital by the public and the private sectorscapital by the public and the private sectors• Effective family-planning policiesEffective family-planning policies

Strong family planning programs

Economic Growth, Poverty and Inequality in KoreaEconomic Growth, Poverty and Inequality in Korea

Trend in Total Fertility Rate

4.53 (1970) 2.83 (1980) 1.59 (1990)

2828

Trend in the Relative Poverty Rates

Economic Growth and Relative Poverty

Increase in the Relative Poverty Rates

8.6% in 1996 10.0% in 2000 11.7% in 2004.

(poverty line: 50% of medium income)

0

2

4

6

8

10

12

'96 '97 '98 '99 '00 '01 '02 '03 '04

Economic Growth, Poverty and Inequality in Korea

Factors for the Increase in Relative PovertyFactors for the Increase in Relative Poverty

• Globalization, and industrial and job insecurity Globalization, and industrial and job insecurity increase in the working poorincrease in the working poor

• Low fertility and population ageingLow fertility and population ageing

increase in the poor agedincrease in the poor aged

• Changes in family structure and the break-up of families Changes in family structure and the break-up of families Increase in the poor female householdersIncrease in the poor female householders

Economic Growth, Poverty and Inequality in Korea

The importance of the strategies is increasingly The importance of the strategies is increasingly

recognized : recognized :

• To tackle relative poverty issuesTo tackle relative poverty issues

• To enhance equal income distribution To enhance equal income distribution

• To promote social integrationTo promote social integration

Economic Growth, Poverty and Inequality in Korea

Economic Growth Rate and the Gini IndicatorEconomic Growth Rate and the Gini Indicator

Sources: Raw data from the Korea National Statistical Office's 『 Survey of Urban Households 』 (published annually), for each year The Bank of Korea's website data, for each year

Economic Growth, Poverty and Inequality in Korea

3333

Changes in Principle

National development strategy before 1997Concentrating on economic growth Welfare as residual measures for the poor

Development strategy since 2003

Harmonized approach between growth and welfare

focusing on sustainable development

Changes in Poverty Reduction Strategies in KoreaChanges in Poverty Reduction Strategies in Korea

“Growth First, Welfare Later”

“Growth Together with Welfare”

3434

Changes in Target Beneficiaries

III. Changes in Poverty Reduction Strategies in III. Changes in Poverty Reduction Strategies in KoreaKorea

Changes in Poverty Reduction Strategies in Korea

The poor unable to work

The poor

able to work

unable to work

The poorand the near poor

able to work

unable to work

Financial Crisis“Participation Government”

1948~1997 1998~2002 2003~

Composition of Korean Overseas Direct Invesment 2004

Africa: 1.7% Oceania: 2.3%

Europe: 16.6%

Latin America &the Caribbean:

7.8%

North America:28.8%

Middle East:1.8%

Asia: 41.0%

Composition of Korean ODI in Manufacturing in LAC, 2004

Metals: 9.7%

Petroleum &Petrochemical: 7.2%

Others: 4.5%Shoes & Leather:2.2%

Food & Beverage:4.7%

Electronic &Communication

Equipments: 37.9%

Textile & Clothing:33.8%

Samsung Tijuana Park Case

Brief Introduction

- Samsung Tijuana Park: Three Plants 1) Samsung Mexicana (Samex): Television sets, computer

monitors, cellular phones and computers.2) Samsung Display Interface Mexicana (SDIM): Cathode-ray tube

(CRT) monitors. In 1997, the plant began to produce Liquid Crystal Display (LCD) monitors.

3) Samsung Electro-Mecánicos Mexicana (SEMSA) Electronic Components for televisions, monitors.

Samsung Tijuana Park Case

Major Features

- Investment amount: Over US$ 200 million. Samsung Group owns 100% of stocks.

- Employment: 6,000 full-time employees.- Operation rate: 96.2%.- Sales: 2,059 million US$- Production: Monitor, 4 million sets (CDT models: 5, LCD models:

9); TV production, 3 million sets (TV models: 90); Assembled PCs, 100 thousand; HHP production, 900 thousand.

Samsung Tijuana Park Case

Electronics initiated its SAMEX as a Maquiladora to assemble television sets in 1988. Aimed entirely at the North American Market. First Investment Capital: U$3,700 million

2) After NAFTA, its target market from North America to Mexico.3) In 1994, Samsung Group inaugurated Samsung Tijuana Park4) Integrate components and finished goods vertically.5) Over 200 million US$ was invested. Until 2001, five new

plants and renovation continued.

How Successful?1) 30 % to Mexico Market in 2003. 2) Turnover rates only 3% in 20033) No labor union yet.

World Trade 2009World Trade 2009

The World Trade Organization (WTO) The World Trade Organization (WTO) expect a decline in world merchandise expect a decline in world merchandise trade volume by 10 percent in 2009, trade volume by 10 percent in 2009, according to World Trade Report 2009: according to World Trade Report 2009: Trade Policy Commitments and Trade Policy Commitments and Contingency Measures which examines Contingency Measures which examines various trade agreement measures used various trade agreement measures used by governments in times of economic by governments in times of economic crisis. crisis.

While annualized quarterly growth rates of While annualized quarterly growth rates of world trade was dropping at a rate of more world trade was dropping at a rate of more than 20%.than 20%.

Free Trade Negotiations Both countries are committed to enhance the

Mexico-Korea Strategic Partnership by increasing economic, social and cultural exchanges, and through cooperation projects in various areas of common interest.

Mexico is Korea’s first trading partner in Latin America [and 10th globally] while Korea is Mexico’s 6th most important partner.

There is still hard work and lobbying to be done by both sides in order to convince important sectors of our economies of the benefits of an FTA, which will expand investment and business opportunities between both countries.

2006 GDP per capita*

$6,621 $3,308 $27,992 $20,572 $8,065 $ $8,862

Economic Growth in Asia

*2006 GDP per capita is shown as PPP (purchasing power parity in constant 2000 international $) Source: World Bank WDI

5-Year Average Real GDP Annual Growth Rate (2002-2006)

10.0%

7.8%

1.8%

4.8%

5.6%

3.2%

China India Japan S. Korea Thailand World

2006 GDP per capita*

Economic Growth in Latin America, Mexico, & the Caribbean

$13,652 $7,826 $10,939 $6,886 $9,967 $5,725 $6,485 $8,862

*2006 GDP per capita is shown as PPP (purchasing power parity in constant 2000 international $) Source: World Bank WDI

5-Year Average Real GDP Annual Growth Rate (2002-2006)

4.9%

3.2%

4.4% 4.4%

2.8%

5.8%

4.5%

3.2%

Argentina Brazil Chile Colombia Mexico Peru Venezuela World

Economic Growth in the U.S. Economic Growth in the U.S. and Canadaand Canada

2006 GDP per capita*

$30,278 $38,165 $8,862

*2006 GDP per capita is shown as PPP (purchasing power parity in constant 2000 international $) Source: World Bank WDI

5-Year Average Real GDP Annual Growth Rate (2002-2006)

2.7%

3.1%

3.2%

Canada United States World

(Var. % anual)

Fuente: INEGI y Us Federal Reserve.

-12.0

-10.0

-8.0

-6.0

-4.0

-2.0

0.0

2.0

4.0

6.0

8.0

10.0

2004

/01

2004

/03

2004

/05

2004

/07

2004

/09

2004

/11

2005

/01

2005

/03

2005

/05

2005

/07

2005

/09

2005

/11

2006

/01

2006

/03

2006

/05

2006

/07

2006

/09

2006

/11

2007

/01

2007

/03

2007

/05

2007

/07

2007

/09

2007

/11

2008

/01

2008

/03

2008

/05

2008

/07

2008

/09

2008

/11

2009

/01

MEXICO USA

FoxCalderón

¿¿Podemos ver en la recesión, la caída Podemos ver en la recesión, la caída de la producción industrial en México y de la producción industrial en México y

los Estados Unidos?los Estados Unidos?

The World Economic ForumThe World Economic ForumThe World Economic Forum is an independent international The World Economic Forum is an independent international

organization committed to improving the state of the world by organization committed to improving the state of the world by engaging leaders in partnerships to shape the global, regional and engaging leaders in partnerships to shape the global, regional and industry agendas.industry agendas.

Established in 1971, the Forum has its headquarters in Geneva, Established in 1971, the Forum has its headquarters in Geneva, Switzerland, with offices in New York and Beijing.Switzerland, with offices in New York and Beijing.

The World Economic ForumThe World Economic ForumMember CommunitiesMember Communities

Strategic PartnersStrategic Partners Industry Partners Industry Partners Forum MembersForum Members Global Growth CompaniesGlobal Growth Companies Technology PioneersTechnology Pioneers

Thought Leaders (religion, Thought Leaders (religion, culture, science)culture, science)

Media LeadersMedia Leaders Women LeadersWomen Leaders Young Global LeadersYoung Global Leaders Social EntrepreneursSocial Entrepreneurs Governments and Governments and

International OrganisationsInternational Organisations Civil SocietyCivil Society

Use of hard data (publicly available information) and survey

data (from the Executive Opinion Survey)

The Executive Opinion Survey records the perspectives of

business leaders around the world; survey data is

indispensable, particularly for dimensions where no reliable

hard data sources exist

The Global The Global Competitiveness Report Competitiveness Report

Data sourcesData sources

The set of institutions, policies, and factors that

determine the level of productivity of an economy.

The level of productivity, in turn, sets the sustainable

level of prosperity that can be earned by an

economy.

The Global Competitiveness The Global Competitiveness IndexIndex

DefinitionDefinition

The Global Competitiveness Index 2009-2010 The Global Competitiveness Index 2009-2010 Top 20 and selected economiesTop 20 and selected economies

2009 2009 2008 2009 2009 2008 rank Economy score rank rank Economy score rank

1 Switzerland 5.60 2 22 Qatar 4.95 26

2 United States 5.59 1 24 Malaysia 4.87 21

3 Singapore 5.55 5 29 China 4.74 30

4 Sweden 5.51 4 30 Chile 4.70 28

5 Denmark 5.46 3 31 Czech Republic 4.67 33

6 Finland 5.43 6 33 Spain 4.59 29

7 Germany 5.37 7 36 Thailand 4.56 34

8 Japan 5.37 9 40 Tunisia 4.50 36

9 Canada 5.33 10 45 South Africa 4.34 45

10 Netherlands 5.32 8 49 India 4.30 50

11 Hong Kong SAR 5.22 11 54 Indonesia 4.26 55

12 Taiwan, China 5.20 17 56 Brazil 4.23 64

13 United Kingdom 5.19 12 60 Mexico 4.19 60

14 Norway 5.17 15 61 Turkey 4.16 63

15 Australia 5.15 18 63 Russian Federation 4.15 51

16 France 5.13 16 70 Egypt 4.04 81

17 Austria 5.13 14 82 Ukraine 3.95 72

18 Belgium 5.09 19 99 Nigeria 3.65 94

19 Korea, Rep. 5.00 13 113 Venezuela 3.48 105

20 New Zealand 4.98 24 132 Zimbabwe 2.77 133

Korean CompetitivenessKorean Competitiveness South Korea ranked eighth among the G-20 countries in terms of national South Korea ranked eighth among the G-20 countries in terms of national

competitiveness, according to a report by the International Institute for competitiveness, according to a report by the International Institute for Management Development (IMD) in 2010. The United States topped the list, Management Development (IMD) in 2010. The United States topped the list, followed by Australia, Canada, Germany, Japan, China and Britain. The report is followed by Australia, Canada, Germany, Japan, China and Britain. The report is based not only on economic activity but also other categories covering based not only on economic activity but also other categories covering competitiveness in science, infrastructure, business and government efficiency.competitiveness in science, infrastructure, business and government efficiency.

Korea, the host for the G-20 summit in November, was strong in science and Korea, the host for the G-20 summit in November, was strong in science and infrastructure, but had poor showings in government efficiency and economic infrastructure, but had poor showings in government efficiency and economic activity. The G-20 rankings are compiled from IMD's global survey with Saudi activity. The G-20 rankings are compiled from IMD's global survey with Saudi Arabia and the European Union excluded. Arabia and the European Union excluded.

Korea drew a high grade in basic research activities, a subcategory of the Korea drew a high grade in basic research activities, a subcategory of the science environment field, sitting second to Germany. Japan and Britain were science environment field, sitting second to Germany. Japan and Britain were tied for third. tied for third.

In overall infrastructure, Korea placed eighth with the United States at the top In overall infrastructure, Korea placed eighth with the United States at the top of the list, and fourth in infrastructure competitiveness in science following the of the list, and fourth in infrastructure competitiveness in science following the United States, Germany and Canada.United States, Germany and Canada.

However, its economic activity placed 14th, with the United States leading the However, its economic activity placed 14th, with the United States leading the countries, and its overall government efficiency was 10th.countries, and its overall government efficiency was 10th.

Korean CompetitivenessKorean Competitiveness The report gave a high score to Korea, when it was placed fourth The report gave a high score to Korea, when it was placed fourth

behind Indonesia, South Africa and Canada in fiscal policy behind Indonesia, South Africa and Canada in fiscal policy management.management.Korea ranked ninth and 10th, respectively, in business efficiency Korea ranked ninth and 10th, respectively, in business efficiency and labor market conditions.and labor market conditions."Above-average national competitiveness and national power "Above-average national competitiveness and national power contributed to Korea winning the bid to host the G-20 summit for the contributed to Korea winning the bid to host the G-20 summit for the first time as an emerging nation“.first time as an emerging nation“.

The G-20 comprises the economies of Argentina, Australia, Brazil, The G-20 comprises the economies of Argentina, Australia, Brazil, Britain, Canada, China, the European Union, France, Germany, India, Britain, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, Turkey and the United States as well as South Korea.Turkey and the United States as well as South Korea.

A variety of top level conferences are scheduled in the lead-up to A variety of top level conferences are scheduled in the lead-up to the November summit in Seoul. the November summit in Seoul.

The G-20 summit was created at the height of the financial crisis The G-20 summit was created at the height of the financial crisis last year in order to bring concerted power to fighting what was last year in order to bring concerted power to fighting what was labeled the "Great Recession," after concluding that the existing G-7 labeled the "Great Recession," after concluding that the existing G-7 was not encompassing enough to deal with the crisis. was not encompassing enough to deal with the crisis.

Mexican Competitiveness Ranked 60th in the Global

Competitiveness Index 2008-2009, Mexico presents important strengths in its market size, sophisticated business sector and diversified production structure as well as its sound macroeconomics fundamentals. However, a number of weaknesses remain in the quality of institutions, goods and labour markets, education standards, energy and innovation potential.

Korea and the 2009 CrisisKorea and the 2009 Crisis The The KoreanKorean won fell precipitously in U.S. dollar terms won fell precipitously in U.S. dollar terms

relative to the Japanese yen and Chinese yuan early in the relative to the Japanese yen and Chinese yuan early in the downturn, helping to preserve the downturn, helping to preserve the competitivenesscompetitiveness of of KoreanKorean exports. exports. KoreanKorean consumers rallied to the cause, consumers rallied to the cause, shifting purchases from imports to local products in behavior shifting purchases from imports to local products in behavior evocative of the "IMF sales" of the 1997 financial crisis. evocative of the "IMF sales" of the 1997 financial crisis.

As Korea emerges from the global recession, its biggest As Korea emerges from the global recession, its biggest companies should revisit their strategies of international companies should revisit their strategies of international competitiveness. The era in which Korea can rely on labor competitiveness. The era in which Korea can rely on labor market flexibility and exchange rate advantages is waning. market flexibility and exchange rate advantages is waning. Korea's historically successful globalization model will come Korea's historically successful globalization model will come under increasing pressure due to unsettled financial markets, under increasing pressure due to unsettled financial markets, a weakened U.S. dollar, increased protectionism, and a weakened U.S. dollar, increased protectionism, and stronger competitors.stronger competitors.

Economic Growth in Mexico 2010

Mexico’s Finance Ministry raised its forecast for economic growth this year to 4.1 percent in 2010, which would be the fastest pace in a decade, as U.S. shoppers increase demand for the country’s exports.

Consumer demand will also pick up in Mexico and spending on infrastructure will further stimulate the economy in 2010.

The expected recovery process in 2010 will be supported by greater growth in internal demand, thanks to a recovery in employment and lending, as well as infrastructure investment and expected growth in exterior demand.

Investment may increase 5.3 percent while consumption rises 4.2 percent. Mexico will generate 9.2 billion pesos ($745 million) of oil revenue above the budgeted amount because of rising crude prices.

““Competitiveness and Economic Growth. An Competitiveness and Economic Growth. An Analysis of Mexico and Korea.”Analysis of Mexico and Korea.”

““Crecimiento Económico y Competitividad. Un Análisis de Crecimiento Económico y Competitividad. Un Análisis de México y Corea.”México y Corea.”

Dr. Alejandro Díaz-BautistaDr. Alejandro Díaz-Bautista

Professor of Economics and Researcher at El Colegio de la Frontera Norte (COLEF)

Profesor Investigador del Colef. Miembro del SNI Conacyt.

adiazbau@hotmail.com

Prepared for the Conference at the Faculty of Economics, University of Colima, April 29-30, 2010. Colima, Colima, Mexico.

Preparado para la Conferencia en la Facultad de Economía de la Universidad de Colima, para los estudios en Cuenca del Pacífico en la Universidad de Colima, los días 29 y 30 de abril de 2010.