Increasing your chances of success while leaving your comfort zone: Adapting Sri Lanka’s growth model
January 9th 2017 Professor Ricardo Hausmann Director of the Center for International Development Harvard University Hon. Maithripala Sirisena Hon. Ranil Wickremesinghe Hon. Malik Samarawickrama Hon. Sujeewa Senasinghe President of Sri Lanka Prime Minister of Sri Lanka Minister of Development State Minister of Strategies and International Trade International Trade
Mrs. Chandani Wijewardana Mr. J. Charitha Ratwatte Mr. Mangala Yapa Dr. Saman Kelegama Secretary, MoDSIT Senior Adviser to the Prime Agency for Development (TBC) Agency for International Trade (TBC) Minister of Sri Lanka Mr. Upul Jayasuriya Mr. Duminda Ariyasinghe Ms. Indira Malwatte Paddy Withana Chairman, BOI Director General, BOI Chairperson & Chief Chairman, SLTDA Executive, EDB Investment Targeting Team Investor Engagement Team Export Innovation Team
Investor Climate/ Kuchchaveli Response Team Tourism Team SRI LANKA’S ACHIEVEMENTS AND CHALLENGES Sri Lanka’s path to middle income status has been strong and its efforts over the long-term in health and education delivery have been commendable.
Human Development Index (HDI) in South Asia GDP per capita:
1 3,926 US$ (2015) Very High Life expectancy: .8 High 74.8 (2014) Medium
.6 Adult literacy rate: Low 92.6 (2015) .4
Note: Sri Lanka’s level
.2 of development is the 1990 2000 2010 2014 highest in South Asia. Year Thus, the remainder of this analysis uses a Sri Lanka Maldives India Bhutan Bangladesh Nepal Pakistan Afghanistan different group of comparator countries. Data source: UNDP Human Development Report, 2015 Strong growth and the end of the conflict have been translated into poverty reduction throughout Sri Lanka. Poverty headcount index in 2002 vs. 2012/13 …but several parts of the country still remain left behind, and many people remain disconnected from the opportunities created by past growth.
Source: Department of Census and Statistics the lastfouryears HOWEVER: percapitagrowthhas slowed during
Growth Rate of GDP per capita -4 -2 0 2 4 6 8 10 1995 on CBSL projections Data sources: World Development Indicatorsthrough 2015&predictedvalue for 2016based Note: GDP percapitaasmeasured inconstant2010US$ Annual GrowthRatesandFive-Year Moving Average 2000 2005 Year 2010 2015 the lastfouryears HOWEVER: percapitagrowthhas slowed during
Growth Rate of GDP per capita -4 -2 0 2 4 6 8 10 1995 on CBSL projections Data sources: World Development Indicatorsthrough 2015&predictedvalue for 2016based Note: GDP percapitaasmeasured inconstant2010US$ Annual GrowthRatesandFive-Year Moving Average 2000 2005 Year 2010 2010-12 acceleration Post-war growth 2015 the lastfouryears HOWEVER: percapitagrowthhas slowed during
Growth Rate of GDP per capita -4 -2 0 2 4 6 8 10 1995 on CBSL projections Data sources: World Development Indicatorsthrough 2015&predictedvalue for 2016based Note: GDP percapitaasmeasured inconstant2010US$ Annual GrowthRatesandFive-Year Moving Average 2000 2005 Year 2010 Slowdown 2013-16 2010-12 acceleration Post-war growth 2015 of thecurrentaccountactedasaspeed limit. Why didgrowthslowdown?Because awidening
-5 0 5 10 15 1995 2000 Real GDP growth (annual%) Trade deficit ingoodsandservices (%ofGDP) 2005 Year 2010 Sources: WDI; IMF Press Releases 2015 Why did growth slow down? Because a widening of the current account acted as a speed limit. 15 10 5 0 -5 1995 2000 2005 2010 2015 Year
Trade deficit in goods and services (% of GDP) Real GDP growth (annual %)
Sources: WDI; IMF Press Releases Why did growth slow down? Because a widening of the current account acted as a speed limit. 15 10 5 IMF IMF EFF SBA (2016)
0 (2009)
IMF SBA (2001) -5 1995 2000 2005 2010 2015 Year
Trade deficit in goods and services (% of GDP) Real GDP growth (annual %)
Sources: WDI; IMF Press Releases 8% Sri Lanka’s GDP 7% growth
6% conundrum
5% • GDP growth is strong by regional 4% standards.
3%
2%
1% Real, annualized growth rate, 2000-15
0% CRI IDN IND PHL PHL LKA LKA THA THA SGP SGP MYS VNM Source: WDI 14% Sri Lanka’s GDP Exports (goods & services) 12% growth conundrum 10% • GDP growth is 8% strong by regional standards. 6% • Exports are not keeping pace… 4%
2% Real, annualized growth rate, 2000-15
0% CRI IDN IND LKA LKA PHL PHL THA THA SGP SGP MYS VNM Source: WDI 14% Sri Lanka’s GDP Exports (goods & services) 12% growth Imports (goods & services) conundrum 10% • GDP growth is 8% strong by regional standards. 6% • Exports are not keeping pace… 4% • ...but imports are. 2% Real, annualized growth rate, 2000-15
0% CRI IDN IND LKA LKA PHL PHL THA THA SGP SGP MYS VNM Source: WDI Export growth is consistently lagging behind peers Off the charts: Vietnam: 12,000! China: 2,700
IND
1500 CRI
THA 1000
MYSPHL IDN SGP LKA 500 0 Exports of goods and services (1990=100) 1990 1995 2000 2005 2010 2015 Data source: UN COMTRADE, via CID. Not adjusted for inflation. And the economy is now considerably less export-oriented
189 188 Exports of goods and Exports of goods and services (% GDP), services (% GDP), 2000 2014
120
86 74 69 65
49 50 51 39 41 35 29 21 21 23 23 24 13
Source: IND IDN CRI IND IDN CRI LKA LKA PHL PHL THA THA WDI SGP SGP CHN MYS CHN MYS VNM VNM fast enough:SriLanka’s exportsarenotdiversifying. One reasonwhySriLanka’s exportsarenotgrowing Share of exports, 2014 0.0 0.2 0.4 0.6 0.8 1.0
LKA
PHL
MYS
IND
IDN
CHN
VNM
THA
CRI
Annualized export growth (%), 2000-2014 Never Before 1970 1970-1979 1980-1989 1990-1999 2000-2014 RCA >0.5: First yearwhen 0 5 10 15 20
LKA Never Before 1970 1970-1979 1980-1989 1990-1999 2000-2014 RCA >0.5: First yearwhen
PHL
MYS new products comes from of growth Over 3%points
Source: UN COMTRADE, viaCID IDN
IND
THA
CHN
VNM
CRI In other countries, diversification results in a direct boost to incomes
New export products, 2000-2015 Products without RCA in 1998-2000 and with RCA in 2013-2015
New USD per USD Country products capita (billions)
China 76 245 331.6 Thailand 70 326 21.8 Vietnam 48 545 50.4 Philippines 11 12 1.2 Malaysia 10 149 4.7 Sri Lanka 7 5 0.1 Costa Rica 6 139 0.7 Indonesia 4 3 0.8 India 0 n/a n/a Note: uses both standard RCA and population-based version; excludes natural resources. Source: CID calculations using COMTRADE data In other countries, diversification results in a direct boost to incomes
New export products, 2000-2015 Products without RCA in 1998-2000 and with RCA in 2013-2015
New USD per USD Country Product products capita (billions)
China 76 245 331.6 Rags, textile scraps Thailand 70 326 21.8 Woven fabrics of bast fibers Vietnam 48 545 50.4 Wheat or meslin flour Philippines 11 12 1.2 Cigarettes Malaysia 10 149 4.7 Tulles and other net fabrics Sri Lanka 7 5 0.1 Lead oxides Costa Rica 6 139 0.7 Textile for conveyor belts Indonesia 4 3 0.8 India 0 n/a n/a Note: uses both standard RCA and population-based version; excludes natural resources. Source: CID calculations using COMTRADE data Sri Lanka’s export composition has been stagnant since the mid-1990s. Sri Lanka’s Goods Exports Share of exports
Source: Atlas of Economic Complexity Compare to Vietnam Vietnam’s Goods Exports Share of exports
Source: Atlas of Economic Complexity Or India India’s Goods Exports Share of exports
Source: Atlas of Economic Complexity followed byelectronicsandthenmachinery Countries oftenfirstdiversifyintogarments,
Market share 0 .1 .2 .3 .4 1960 CHINA mktsmachinery mktsgartext 1980 Year 2000 mktselectronics Machinery Electronics and textiles Garments 2020 exports asgrowthinotherindustries picksup Over time,garmentstendtopeakas ashareof
Market share
0 .005 .01 .015 .02 .025 1960 THAILAND mktsmachinery mktsgartext 1980 Year 2000 mktselectronics 2020 Machinery Electronics and textiles Garments garments phase …but sometimescountriesgetstuckin the
Market share 0 .002 .004 .006 .008 1960 TUNISIA mktsmachinery mktsgartext 1980 Year 2000 mktselectronics and textiles Garments Machinery Electronics 2020 …this iswhathashappenedinSriLanka
Market share
0 .002 .004 .006 .008 1960 SRI LANKA mktsmachinery mktsgartext 1980 Year 2000 mktselectronics
Machinery Electronics and textiles Garments 2020 In service exports, Sri Lanka performs relatively well in transport and insurance/finance, but has much room to grow in tourism and ICT.
Service exports per capita, 2014 (BoP, current USD)
Notes: Transport service exports are services related to the movement of non-resident goods & passengers. Travel service exports are services consumed by visitors (inc. tourists). Disaggregated data not available for Vietnam. Source: WDI In service exports, Sri Lanka performs relatively well in transport and insurance/finance, but has much room to grow in tourism and ICT.
Service exports per capita, 2014 (BoP, current USD)
Notes: Transport service exports are services related to the movement of non-resident goods & passengers. Travel service exports are services consumed by visitors (inc. tourists). Disaggregated data not available for Vietnam. Source: WDI In service exports, Sri Lanka performs relatively well in transport and insurance/finance, but has much room to grow in tourism and ICT.
Service exports per capita, 2014 (BoP, current USD)
Notes: Transport service exports are services related to the movement of non-resident goods & passengers. Travel service exports are services consumed by visitors (inc. tourists). Disaggregated data not available for Vietnam. Source: WDI Sri Lanka’s main exports tend to face competition from low income countries Global Share of Women’s Undergarments Sri Lanka’s Goods Exports, 2014 Exports (Net) in 2014
GDP per capita (USD) in 2014 8,000"
7,000"
6,000"
5,000"
4,000"
3,000"
2,000"
1,000"
0" China" India" Bangladesh" Sri"Lanka" Cambodia" Vietnam" Sources: Atlas of Economic Complexity; WDI Wages in Sri Lanka’s main export industry are now lower than for most other jobs. Without diversification beyond garments, export growth cannot keep pace.
Wearing apparel Construction
0 50 100 150 200 Hourly wage (Rs.)
Note: Red reference line indicates the national median wage. Wages in Sri Lanka’s main export industry are now lower than for most other jobs. Without diversification beyond garments, export growth cannot keep pace.
Wearing apparel Construction Compare with Panama:
0 50 100 150 200 Hourly wage (Rs.)
Note: Red reference line indicates the national median wage. Summing up: Summing up:
• In many ways, Sri Lanka is doing well
Summing up:
• In many ways, Sri Lanka is doing well • But growth has slowed over the last four years
Summing up:
• In many ways, Sri Lanka is doing well • But growth has slowed over the last four years • This is because Sri Lanka had a post-war growth acceleration that was unsustainable, caused by a construction boom financed by capital inflows and a widening current account
Summing up:
• In many ways, Sri Lanka is doing well • But growth has slowed over the last four years • This is because Sri Lanka had a post-war growth acceleration that was unsustainable, caused by a construction boom financed by capital inflows and a widening current account • To sustain higher growth, expand exports needs to expand faster to cover for the growth in imports Summing up:
• In many ways, Sri Lanka is doing well • But growth has slowed over the last four years • This is because Sri Lanka had a post-war growth acceleration that was unsustainable, caused by a construction boom financed by capital inflows and a widening current account • To sustain higher growth, expand exports needs to expand faster to cover for the growth in imports • Exports are not growing fast enough because they have not diversified beyond a set of traditional goods: tea, rubber and garments
Summing up:
• In many ways, Sri Lanka is doing well • But growth has slowed over the last four years • This is because Sri Lanka had a post-war growth acceleration that was unsustainable, caused by a construction boom financed by capital inflows and a widening current account • To sustain higher growth, expand exports needs to expand faster to cover for the growth in imports • Exports are not growing fast enough because they have not diversified beyond a set of traditional goods: tea, rubber and garments • The problem is that Sri Lanka’s export industries pay low wages and compete with low wage countries Summing up:
• In many ways, Sri Lanka is doing well • But growth has slowed over the last four years • This is because Sri Lanka had a post-war growth acceleration that was unsustainable, caused by a construction boom financed by capital inflows and a widening current account • To sustain higher growth, expand exports needs to expand faster to cover for the growth in imports • Exports are not growing fast enough because they have not diversified beyond a set of traditional goods: tea, rubber and garments • The problem is that Sri Lanka’s export industries pay low wages and compete with low wage countries • How can Sri Lanka increase its exports by diversifying into higher- productivity industries that can afford higher wages? HOW DO COUNTRIES AND REGIONS DEVELOP HIGHER PRODUCTIVITY INDUSTRIES?
The two Nogales
What do you do when your tooth hurts? What do you do when your tooth hurts?
Search the web and fix it yourself? What do you do when your tooth hurts?
Search the web and fix it yourself? …or look for a dentist
Knowhow needs to be in brains
Who has more knowhow?
Te
Teory of Economic Development…
Diversifica on and ubiquity - 2009 Diversifica on and ubiquity - 2009 It also works within countries: Chile
Diversity-Average Ubiquity Municipali es 300 OLLAGUE FOR CHILE 2008
COLCHANE
GENERAL LAGOS
PRIMAVERA
SAN ROSENDO SAN TORTELGREGORIO LAGUNA SIERRABLANCA GORDA QUILACO CAMARONESANTUCO HUALAIHUECAMINAALTO BIO BIOFUTALEUFUPEMUCO 250 TORRESLAGO DE VERDE PAINEPUTRE TIMAUKEL NINHUETREHUACOCURARREHUEGALVARINO MELIPEUCOSANCOCHRANEERCILLA FABIAN HUARAPALENA O'HIGGINSPUQUELDONEMPEDRADOCOBQUECURAPERQUENCONIQUENCONTULMOQUILLECO ALTO DELPICASAAVEDRA CARMENNAVIDAD ANTARTIDAJUAN FERNANDEZMARIARIO IBANEZ ELENARANQUIL PORTEZUELOLALUMACO ESTRELLAMARCHIGUE GUAITECASPUMANQUEVICHUQUENALHUE RIO HURTADOLAGO RANCOTEODORO SCHMIDT NEGRETECOINCOTIRUAPAREDONESPINTOSANTA JUANA CHOLCHOLSAN JUAN DE PELLUHUEPAPUDOLACANELA COSTAEL CARMEN CABO DE HORNOSLONQUIMAY LA HIGUERAPAIHUANOSAN PEDROSAN DE RAFAEL ATACAMA ANDACOLLOSANCUREPTOCHANCO PEDRO DE MELIPILLA ISLA DE PASCUA LOSPUERTOLOLOL SAUCESYERBASRINCONADA OCTAY BUENAS MAFILPUNITAQUITOLTENPANQUEHUEPALMILLA CURACOFREIRINA DE VELEZPENCAHUEFLORIDAFRESIA SANCHILERIO PABLOLITUECHE CLARO CHICOHUALANEEL TABO PELARCOSAN NICOLASTUCAPELPUYEHUECOMBARBALASANTALOS ALAMOS BARBARA QUEMCHI QUIRIHUEPERALILLO CHAITEN TIERRARAUCO AMARILLAVILLATIL-TILFUTRONOCUNCO ALEGRECOIHUECO COCHAMOQUEILEN SANRENAICO IGNACIOCALLEMARIALICANTEN LARGAPINTOPUREN PETORCA CARAHUE RETIROCHEPICASANTAYUMBELRIO MARIA NEGRO SAGRADAGORBEAOLMUEYUNGAYCOELEMUMULCHEN FAMILIA MEJILLONESCISNESPLACILLACODEGUAHUASCOQUINTACATEMULOS TILCOCOQUILLON MUERMOSCOLLIPULLILONGAVILAJA Sin InformaciónCORRAL QUINCHAO COLBUNNANCAGUANOGALES COLTAUCOPEUMOPUCHUNCAVI ZAPALLARELHIJUELAS QUISCOHUALQUINACIMIENTOPAILLACO MAULLINMALLOACHANARALROMERALFREIREPICHIDEGUASANTRAIGUENMARIQUINA ESTEBANCABILDO POZO ALMONTEMAULELEBULANCOLOSLLAY-LLAY LAGOS 200 DALCAHUEOLIVARPUTAENDOCURACAUTINMONTEFRUTILLARBULNESREQUINOA PATRIA VILCUN DIEGO DE ALMAGROLALLANQUIHUE CRUZCHILLANPURRANQUE VIEJO PORVENIRCHONCHI TOCOPILLAALGARROBOCABRERO TALTAL PITRUFQUEN SANTO DOMINGOCARTAGENALOS VILOSNUEVATENO IMPERIAL DONIHUESANPICHILEMU FCORIO DE BUENO MOSTAZAL RIO VERDE VICUNACURANILAHUELASMACHALI CABRAS QUELLONCALBUCOSANEL CLEMENTE LONCOCHEMONTEISLACURACAVIPANGUIPULLI DE MAIPO SAN JOSE MAIPOPIRQUECANETE CALDERA CALERA ARAUCODELAUTARO TANGO LOTAGRANEROSSALAMANCAPENCO ILLAPELCHIMBARONGOTOME MOLINALA LIGUA PUERTOAYSENQUINTERO NATALESCAUQUENES VICTORIASAN JAVIER CASABLANCAPUCONLA UNIONPARRAL PADRE ANGOLLAS CASAS ALTO HOSPICIOCONSTITUCIONSAN VICENTE T-T PADRE HURTADOLIMACHE HUALPEN VALLENAR LO ESPEJOCON ANCUDCHIGUAYANTECONSAN CARLOS (Average Ubiquity)(Average RENGOVILLARRICALASANTA CALERA CRUZ
1 PAINE BUINTALAGANTE LO PRADOCASTRO CERROSAN RAMON NAVIA LOS ANDES k CORONELCOYHAIQUEPENAFLORCOLINA LINARES OVALLEVILLA ALEMANA LA PINTANAPUERTOSAN PEDRO VARASQUILLOTASAN DEFELIPE LA PAZ 150 P AGUIRRERENCALAMPA CERDA SANMELIPILLA FERNANDO LA GRANJACALAMA EL BOSQUELO BARNECHEASAN ANTONIO PUDAHUEL CERRILLOSHUECHURABACOPIAPOQUILPUE CONCHALILA REINATALCAHUANOPENALOLEN SAN JOAQUINMACUL LOS ANGELES ESTINDEPENDENCIA CENTRAL COQUIMBOSANCHILLAN MIGUEL QUILICURALA CISTERNACURICOOSORNO QUINTA NORMALLAVALDIVIA SERENA RECOLETAPUNTAARICA ARENAS IQUIQUE RANCAGUA VITACURALA FLORIDATALCA VALPARAISOSANNUNOA BERNARDO ANTOFAGASTAPUENTEPUERTO ALTOTEMUCO MONTT CONCEPCION VINAMAIPU DEL MAR
PROVIDENCIA LAS CONDES 100 SANTIAGO 0 100 200 300 400 500 600 k (Diversification) 0 …Turkey
Diversity and average ubiquity of Turkey's cities ARDAHAN TUNCELİ 60
IĞBDIRİNGÖL BAYBURTAHAKKARĞRI İ 50 GÜMÜŞHANE MUŞ SİİRT BİTLERZİS İNCAN 40 RİZE ŞIRNAKARTVKARSBATMANSNBARTINİİĞNOPİNDE ADIYAMANKARABÜKKASTAMONUVANERZURUM KIRAKSARAYOSMANAMASYAŞEHİRİYE KİLİGSİRESUNKARAMANDELAZIİYARBAKIRĞ MARDBURDURNEVŞANLIURFATOKATİSŞNİEHVASİR DÜZCEORDUÇANAKKALEYOZGAT ÇANKIRIEDMUISPARTAZONGULDAKBOLUİRNEMALATYAĞLA 30 KIRIKKALEUŞKAHRAMANMARAAKAFYONTRABZON Ş KÜTAHYAHATAY YALOVAÇORUMKIRKLARELAYDIN İ k1 (Averagek1 ubiquity) BİLECİK ANTALYADENSAMSUNİÇELİZLİ BALIKESSAKARYAESKMANKAYSERİŞEHİSAİRİRİ GAZİANTEP TEKİRDAADANAĞ 20 KONYA KOCAELBURSAİ ANKARAİZMİR İSTANBUL 10 0 500 1000 1500 k0 (diversification) Mexican states 28 )
c,1 Tabasco Zacatecas Chiapas Nayarit Campeche Oaxaca Baja California Sur Guerrero Colima 26 Tlaxcala Quintana Roo
Durango Morelos Hidalgo Sinaloa Veracruz Michoacán Yucatán Aguascalientes
24 San Luis Potosí Tamaulipas Guanajuato Puebla Querétaro Chihuahua Baja California Sonora Coahuila
México Jalisco 22
Nuevo León
Distrito Federal Average ubiquity of industrial composition (k 20 400 500 600 700 800
Diversity of industrial composition (kc,0) Mexican ci es Colombian departments
Average Ubiquity vs. Diversity 2012 - Total Wages GUAVIARE 12 VAUPESGUAINIA SUCRECAQUETA ARAUCACHOCO VICHADA LA GUAJIRA CESARCORDOBANARIÑO PUTUMAYOHUILA 10 MAGDALENATOLIMAQUINDIO SAN ANDRES Y PROVIDENCIA AMAZONASBOYACACALDAS CASANARENORTEMETA DE SANTANDER CAUCA RISARALDA BOLIVARSANTANDER 8 ATLANTICO CUNDINAMARCA VALLE DEL CAUCA ANTIOQUIA 6
BOGOTA D.C. 4 0 100 200 300 400 500 Country Diversity
av_ubq Fitted values And it works for Sri Lanka Economic Complexity Index ECI correlates with GDP per capita
Countries with Natural Resource Exports>10% of GDP
Countries with Natural Resource Exports<10% of GDP Income Per Capita
Economic Complexity ECI correlates with GDP per capita
Countries with Natural Resource Exports>10% of GDP
Countries with Natural Resource Exports<10% of GDP Income Per Capita
Economic Complexity for NR Exports Income Per Capita controlling Economic Complexity controlling for NR Exports for NR Exports Income Per Capita controlling Economic Complexity controlling for NR Exports for NR Exports Income Per Capita controlling Economic Complexity controlling for NR Exports evolving ataslowpace. Sri Lanka’s economiccomplexityislowandit
-1 -.5 0 .5 1 1.5 1995 Data source: Atlas ofEconomicComplexity Economic ComplexityIndex 2000 2005 Year
2010 2015 Vietnam Thailand Singapore Philippines Malaysia Indonesia India Costa Rica China Sri Lanka How do economies learn?
Mapping out the Forest Some products tend to be exported together… …others not so much
100 KHM MUS TURBGRPRT SLVLKAVNMJORDNKMKD HRV BELITALTUNLDTUN CHNIRLDEUROUESTNIC 10 SVNESPMARMDAGRC SWEAUTSVKHNDFRABGDLVA HUN AREGBR CAN IDNPOLGTM CHE FINALBMYS SRBGEOBLRLAOPHLTHA PER BIH KEN KORCZE 1 EGY DOMISRPAKNORUKRMEXKGZ MDGINDZAF LBN NZLUSACOLKWT UZBAUS KAZ JPN MNG CHLETH URY QAT RUS CRI .1 BWA BOL ARGBRA SAU ECU SYRAZE TTO MWI OMN JAM TZA .01 PRY CMRGAB MRT VENCIVTKM GHADZA UGAZWE .001 TJK AGO
CUBMLI Exports per capita (USD), women's suits
.0001 NGA .0001 .001 .01 .1 1 10 100 Exports per capita (USD), women's shirts Some products tend to be exported together… …others not so much
FRA
100 KHM MUS DEU PRT CAN JORTURBGR SLVLKAVNMDNKMKD USA CHE HRV BELITALTUNLDTUN CHNIRLDEUROUESTNIC 10 SVNESPMARMDAGRC 100 SWEAUTSVKHNDFRABGDLVA HUN AREGBR DNK CAN IDNPOLGTM FIN GBR CHE FINALBMYS ITAESP SRBGEOBLRLAOPHLTHA PER BRAAUT BIH NOR ARE GAB KEN KORCZE SWE NLD 1 ISREGY PRT CZE DOMPAKNORUKRMEXKGZ 10 POL MDGINDZAF AUSROU SVN BEL LBN NZLUSACOLKWT RUS NZL MYS UZB IND JPNAUS ZAF TUR KAZETH MNG THA QAT CHL URY JPN PHL RUS CRI TUNLTU CIV
.1 BOL BWA 1 GEO BGR EST ARGBRA KEN VNM SAU ECU BLR SYRAZE TTO CHN MWI BIHHRV PER OMN JAM TZA COL
.01 HUN
PRY .1 SAU GTM CMRGAB MEX MRTVEN IDN CIVTKM PNGDOMECU GHADZA IRN UGAZWE .001 TJK .01 AGO Exports per capita (USD), aircraft TZA CUBMLI Exports per capita (USD), women's suits CRI VEN
.0001 NGA SLV .0001 .001 .01 .1 1 10 100 .0001 .001 .01 .1 1 10 100 Exports per capita (USD), women's shirts Exports per capita (USD), cocoa beans ELECTRONICS
MACHINERY
AIRCRAFT
BOILERS
SHIPS
METAL PRODUCTS
CONSTR. MATL. & EQPT.
HOME & OFFICE
PULP & PAPER
CHEMICALS & HEALTH
AGROCHEMICALS
OTHER CHEMICALS
INOR. SALTS & ACIDS
PETROCHEMICALS
LEATHER
MILK & CHEESE
ANIMAL FIBERS
MEAT & EGGS
FISH & SEAFOOD
TROPICAL AGRIC.
CEREALS & VEG. OILS
COTTON/RICE/SOY & OTHERS
TOBACCO
FRUIT
MISC. AGRICULTURE
NOT CLASSIFIED
TEXTILE & FABRICS
GARMENTS
FOOD PROCESSING
BEER/SPIRITS & CIGS.
PRECIOUS STONES
COAL
OIL
MINING Community characteristics: Complexity, Connectedness and Market Size
Venezuela 2013 Mexico 2013 Venezuela 2014 Mexico 2014 How do monkeys jump? A tale of two countries
GHANA THAILAND 1962: Roughly equal income
GHANA THAILAND
$295 $363
GDP per capita (constant 2000 US$) Human capital story: GHANA Ghana’s exports in 1962 Thailand’s exports in 1962 Thailand vs. Ghana in the Product Space 1965
Thailand Ghana 1970
Thailand Ghana 1975
Thailand Ghana 1980
Thailand Ghana 1985
Thailand Ghana 1990
Thailand Ghana 1995
Thailand Ghana 2000
Thailand Ghana 2005
Thailand Ghana 2010
Thailand Ghana Ghana’s exports in 1962 Ghana’s exports in 2010 Ghana’s exports per capita at constant 2005 prices Thailand’s exports in 1962 Thailand’s exports in 2010 Thailand’s exports per capita at constant 2005 prices Divergence, big me Sri Lanka 2014 Sri Lanka in the Product Space: Current clusters are saturated. Most new export opportunities are in empty clusters, with few related industries.
Rubber goods
Garments, textiles
Raw coconut, palm, rubber
Precious stones
Tea Sri Lanka 2014 Seafood
Source: Atlas of Economic Complexity Sri Lanka is not on the path of Vietnam
Sri Lanka’s Exports, 1995 Sri Lanka’s Exports, 2014 $3.25B $11.1B ECI = -0.96 ECI = -0.38 Rank: 98/121 Rank: 71/124
Vietnam’s Exports, 1995 Vietnam’s Exports, 2014 $5.14B $146B ECI = -1.22 ECI = -0.09 Rank: 107/121 Rank: 58/124
Source: Atlas of Economic Complexity …or the path from Vietnam to Thailand
Vietnam’s Exports, 1995 Vietnam’s Exports, 2014 $5.14B $146B ECI = -1.22 ECI = -0.09 Rank: 107/121 Rank: 58/124
Thailand’s Exports, 1995 Thailand’s Exports, 2014 $53.4B $237B ECI = 0.13 ECI = 0.94 Rank: 51/121 Rank: 26/124
Source: Atlas of Economic Complexity …or the path from Thailand to China
Thailand’s Exports, 1995 Thailand’s Exports, 2014 $53.4B $237B ECI = 0.13 ECI = 0.94 Rank: 51/121 Rank: 26/124
China’s Exports, 1995 China’s Exports, 2014 $219B $2.34T ECI = 0.21 ECI = 1.10 Rank: 48/121 Rank: 19/124
Source: Atlas of Economic Complexity New research: the Industry Space
Maps the relationships between all domestic activities, including services
Agriculture, Forestry, Fishing Construction Finance, Insurance, Real Estate Manufacturing Mining Public Administration Retail Trade Services Transport & Public Utilities Wholesale Trade Colombo District
Agriculture, Forestry, Fishing Construction Finance, Insurance, Real Estate Manufacturing Mining Public Administration Retail Trade Services Transport & Public Utilities Wholesale Trade Kandy District
Agriculture, Forestry, Fishing Construction Finance, Insurance, Real Estate Manufacturing Mining Public Administration Retail Trade Services Transport & Public Utilities Wholesale Trade Trincomalee District
Agriculture, Forestry, Fishing Construction Finance, Insurance, Real Estate Manufacturing Mining Public Administration Retail Trade Services Transport & Public Utilities Wholesale Trade Mullaitivu District
Agriculture, Forestry, Fishing Construction Finance, Insurance, Real Estate Manufacturing Mining Public Administration Retail Trade Services Transport & Public Utilities Wholesale Trade How do we explain growth?
Yet nearly all new products are highly “distant” from Sri Lanka’s current comparative advantage
Rubber goods
Garments, textiles
Raw coconut, palm, rubber
Precious stones
Tea Sri Lanka 2014 Seafood
Source: Atlas of Economic Complexity Yet nearly all new products are highly “distant” from Sri Lanka’s current comparative advantage
Sri Lanka (Np=920) Vietnam (Np=819) Absent products only Thailand (Np=504) (without Revealed Comparative India (Np=637) Advantage) Malaysia (Np=599) China (Np=352)
0.4 0.6 0.8 1.0
Product Space distance values Note: excludes resources; PCI>ECI Source: calculations based on Comtrade Therefore, the path to diversification may lie in helping investors take “strategic bets” on new sectors How do you iden fy poten al new sectors? • Distance – How far is the industry from the current capabili es of the country or region? • Complexity – How produc ve is the industry? • Strategic value – How much does the development of the industry facilitate further diversifica on? Applying these ideas to Sri Lanka: An efficient frontier between three goals
Complexity and Distance Opportunity Gain and Distance Applying these ideas to Sri Lanka: An efficient frontier between three goals
Complexity and Distance Opportunity Gain and Distance Applying these ideas to Sri Lanka: An efficient frontier between three goals
Complexity and Distance Opportunity Gain and Distance
A BOI/EDB team is now taking a comprehensive approach… How does knowhow move? DIFFUSION OF INDUSTRIES Moving knowledge into brains is hard work... IT IS MUCH EASIER TO MOVE BRAINS: DIFFUSION THROUGH MOBILITY Different mechanisms of diffusion
• Labor mobility between firms • Immigra on • Diasporas • Business travel • FDI Example 1: DETROIT
All successful car firms in Detroit came out of OIds Motor Works Example 2: SILICON VALLEY
Silicon Valley consists almost exclusively of Fairchild Semiconductor renegades DIFFUSION OF INDUSTRIES ...it is easier to move the brains!
- Ne e/Hartog/BoschmaFranschhoek Valley, South Africa /Henning (2014): Industries diffuse when firms and entrepreneurs move to a region DIFFUSION OF INDUSTRIES ...it is easier to move the brains!
Germany Franschhoek Valley, South Africa Colombia Hausmann/Ne e/O o (2013): Ma é Hartog: First analyses show Industry pioneers in East that also in Colombia pioneering Germany strongly hire many of requires mobility of experts their core workers from West Germany
0.25 Share of pioneers' experienced 60% Share of workforce recruited workers hired from West (East) from outside the region 0.20 50% Germany Cluster 40% Pioneer 0.15 30% 0.10 20% 0.05 10%
0.00 0% East Germany West Germany Low wage High wage DIFFUSION OF KNOWLEDGE ACROSS COUNTRIES • Products diffuse through migrants – Bahar and Rapoport (2013) from immigrants? What scopeisthereforSriLanka tolearn and Taiwan. investment from HongKong China benefited from Chinese communities. And benefited fromlargeoverseas and thePhilippineshave Elsewhere, Thailand, Malaysia in eachofthelast10years. 5,000 workvisastoforeigners The BOIhasissuedlessthan come fromIndia. foreign born. Almost all(99%) Few residentsofSriLankaare Sources: WDI; Board ofInvestment ofSri Lanka Visa Recommendation System
% of population 0 10 20 30 40 Hong Kong International migrantstock
Singapore
Costa Rica
Sri Lanka from itsdiaspora? What scopeisthereforSriLanka tolearn
% of population 0 2 4 6 8 Sri Lanka
Singapore Diaspora asaShareofPopulation
Malaysia
Philippines
Vietnam Costa Rica
Thailand
Indonesia
India
China Source: World Bank bilateral migration stocks matrix 2010 diversifica on into ICT and BPO Non-resident Indians were key to India’s How does Sri Lanka do in business travel? It is fairly disconnected from business travel networks, but close to a dynamic cluster.
The country space for business travel (using 2011 data) shows that Sri Lanka is on the periphery of the Far East cluster.
Source: CID using data from MasterCard countries Business travelislimitedversuscomparator
Incomoing business travelers, adjusted per capita 0 .5 1 1.5 Incoming Business Travel Intensity SGP
MYS
THA
CRI
VNM
CHN
PHL
IDN
LKA
IND Source: CID using data from MasterCard; data from 2014 Origin countries of business travelers to LKA, 2014 FDI Net Inflows, 1995-2015 Avg.
Gaining knowhow 20 through FDI? 15
10 Sri Lanka has seen % of GDP little FDI over last 20 5 years. 0 China India Vietnam Malaysia Thailand Sri Lanka Indonesia Singapore Costa Rica Philippines Source: WDI
And no sustained FDI Net Inflows, Sri Lanka increase in FDI after 3 the conflict. 2.5 2 1.5 % of GDP 1 .5
1995 2000 2005 2010 2015 Year Source: WDI New FDI inflows are high in existing sectors…
Logististics, Transport
Financial Services
Tourism
0 5 10 15 20 FDI inflows per capita (USD, estimated)* Sri Lanka Thailand Vietnam Malaysia
Source: fDi Markets, April 2016. Note: dataset is based on estimates of large, high-profile FDI project announcements. * Estimated capital expenditure per capita, January 2009 – March 2016 (annualized)
…but peer countries receive the bulk of their FDI from sectors that are mostly absent in Sri Lanka
Logististics, Transport Sri Lanka Financial Services Thailand Tourism Vietnam Materials, Construction Malaysia Energy
Electronics, ICT
Vehicles, Transport Equip.
Other Clusters
0 20 40 60 80 100 120 140 160 FDI inflows per capita (USD, estimated)*
Source: fDi Markets, April 2016. Note: dataset is based on estimates of large, high-profile FDI project announcements. * Estimated capital expenditure per capita, January 2009 – March 2016 (annualized)
manufacturing andinwhatindustries? Who isSriLankalearningfromthrough FDIin
Capex in millions of USD (estimated) 0 200 400 600 800 1,000 Note: Datasource isbiased towardlarge, high-visibility projects Source: fDi Markets,2003-2015cumulative FDIannounced inmedia SingaporeIndia FDI toSriLankainManufacturing,bySourceCountry
UK
SwitzerlandItaly United States
Australia
South JapanAfrica
Sweden
Germany
Malaysia Luxembourg
Denmark
Nepal
New Zealand UAE
Spain
Belarus
Thailand manufacturing andinwhatindustries? Who isSriLankalearningfromthrough FDIin
Capex in millions of USD (estimated) 0 200 400 600 800 1,000 Note: Datasource isbiased towardlarge, high-visibility projects Source: fDi Markets,2003-2015cumulative FDIannounced inmedia SingaporeIndia FDI toSriLankainManufacturing,bySourceCountry
UK
SwitzerlandItaly United States coa ngs and adhesives; Sugar and confec onary products Tires; Light trucks & u lity vehicles; So drinks & ice; Paints,
Australia
South JapanAfrica
Sweden
Germany
Malaysia Luxembourg
Denmark
Nepal
New Zealand UAE
Spain
Belarus
Thailand manufacturing andinwhatindustries? Who isSriLankalearningfromthrough FDIin
Capex in millions of USD (estimated) 0 200 400 600 800 1,000 Note: Datasource isbiased towardlarge, high-visibility projects Source: fDi Markets,2003-2015cumulative FDIannounced inmedia SingaporeIndia FDI toSriLankainManufacturing,bySourceCountry
UK
SwitzerlandItaly United States coa ngs and adhesives; Sugar and confec onary products Tires; Light trucks & u lity vehicles; So drinks & ice; Paints, Basic chemicals
Australia
South JapanAfrica
Sweden
Germany
Malaysia Luxembourg
Denmark
Nepal
New Zealand UAE
Spain
Belarus
Thailand manufacturing andinwhatindustries? Who isSriLankalearningfromthrough FDIin
Capex in millions of USD (estimated) 0 200 400 600 800 1,000 Note: Datasource isbiased towardlarge, high-visibility projects Source: fDi Markets,2003-2015cumulative FDIannounced inmedia SingaporeIndia FDI toSriLankainManufacturing,bySourceCountry
UK
SwitzerlandItaly United States coa ngs and adhesives; Sugar and confec onary products Tires; Light trucks & u lity vehicles; So drinks & ice; Paints, Basic chemicals
Australia products; and pharmaceu cal prepara ons Prin ng & related ac vi es; Paper products; Consumer
South JapanAfrica
Sweden
Germany
Malaysia Luxembourg
Denmark
Nepal
New Zealand UAE
Spain
Belarus
Thailand manufacturing andinwhatindustries? Who isSriLankalearningfromthrough FDIin
Capex in millions of USD (estimated) 0 200 400 600 800 1,000 Note: Datasource isbiased towardlarge, high-visibility projects Source: fDi Markets,2003-2015cumulative FDIannounced inmedia SingaporeIndia FDI toSriLankainManufacturing,bySourceCountry
UK
SwitzerlandItaly United States coa ngs and adhesives; Sugar and confec onary products Tires; Light trucks & u lity vehicles; So drinks & ice; Paints, Basic chemicals
Australia products; and pharmaceu cal prepara ons Prin ng & related ac vi es; Paper products; Consumer
South JapanAfrica Clothing & clothing accessories; res
Sweden
Germany
Malaysia Luxembourg
Denmark
Nepal
New Zealand UAE
Spain
Belarus
Thailand Is Sri Lanka missing opportunities to learn from neighbors and beyond?
Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) Is Sri Lanka missing opportunities to learn from neighbors and beyond?
Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
India: - Pharmaceu cals (2014) - PVC products (2013) - Other transport equip. (2012) - Furniture (2012) - Fabricated metal products (2010)
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) Is Sri Lanka missing China: - Medical and surgical opportunities to learn from equipment (2016) - Electrical equipment (2014) - Motorcycles (2012) neighbors and beyond? - Pharmaceu cals (2011) - Other transport equip. (2010)
Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
India: - Pharmaceu cals (2014) - PVC products (2013) - Other transport equip. (2012) - Furniture (2012) - Fabricated metal products (2010)
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) South Korea: Is Sri Lanka missing - Fishing boats (2016) China: - Electric lamps & ligh ng - Medical and surgical equip. (2016) opportunities to learn from equipment (2016) - Special purpose - Electrical equipment (2014) machinery (2016) - Motorcycles (2012) - Pharmaceu cals neighbors and beyond? - Pharmaceu cals (2011) (2014/15) - Other transport equip. (2010) - Electricity distribu on & control apparatus (2011) Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
India: - Pharmaceu cals (2014) - PVC products (2013) - Other transport equip. (2012) - Furniture (2012) - Fabricated metal products (2010)
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) South Korea: Is Sri Lanka missing - Fishing boats (2016) China: - Electric lamps & ligh ng - Medical and surgical equip. (2016) opportunities to learn from equipment (2016) - Special purpose - Electrical equipment (2014) machinery (2016) - Motorcycles (2012) - Pharmaceu cals neighbors and beyond? - Pharmaceu cals (2011) (2014/15) - Other transport equip. (2010) - Electricity distribu on & control apparatus (2011) Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
Hong Kong: - Machine tools (2015)
India: - Pharmaceu cals (2014) - PVC products (2013) - Other transport equip. (2012) - Furniture (2012) - Fabricated metal products (2010)
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) South Korea: Is Sri Lanka missing - Fishing boats (2016) China: - Electric lamps & ligh ng - Medical and surgical equip. (2016) opportunities to learn from equipment (2016) - Special purpose - Electrical equipment (2014) machinery (2016) - Motorcycles (2012) - Pharmaceu cals neighbors and beyond? - Pharmaceu cals (2011) (2014/15) - Other transport equip. (2010) - Electricity distribu on & control apparatus (2011) Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
Hong Kong: - Machine tools (2015)
India: Singapore: - Pharmaceu cals (2014) - Fer lizers (2012) - PVC products (2013) - Other transport equip. (2012) - Furniture (2012) - Fabricated metal products (2010)
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) South Korea: Is Sri Lanka missing - Fishing boats (2016) China: - Electric lamps & ligh ng - Medical and surgical equip. (2016) opportunities to learn from equipment (2016) - Special purpose - Electrical equipment (2014) machinery (2016) - Motorcycles (2012) - Pharmaceu cals neighbors and beyond? - Pharmaceu cals (2011) (2014/15) - Other transport equip. (2010) - Electricity distribu on & control apparatus (2011) Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
Hong Kong: - Machine tools (2015)
India: Singapore: - Pharmaceu cals (2014) - Fer lizers (2012) - PVC products (2013) - Other transport equip. (2012) - Furniture (2012) - Fabricated metal products (2010)
Australia: - Special-purpose machinery (2015) - Fer lizers (2012)
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) South Korea: Is Sri Lanka missing - Fishing boats (2016) China: - Electric lamps & ligh ng - Medical and surgical equip. (2016) opportunities to learn from equipment (2016) - Special purpose - Electrical equipment (2014) machinery (2016) - Motorcycles (2012) - Pharmaceu cals neighbors and beyond? - Pharmaceu cals (2011) (2014/15) - Other transport equip. (2010) - Electricity distribu on & control apparatus (2011) Noteworthy rejected or current applications to the BOI in new manufacturing projects since 2010
United Kingdom: - Fer lizers (2016) - Electrical equipment (2014) Hong Kong: - Machine tools (2015) Luxembourg: - Pleasure & spor ng India: Singapore: boats (2012) - Pharmaceu cals (2014) - Fer lizers (2012) - PVC products (2013) France: - Other transport equip. (2012) - Pleasure & spor ng - Furniture (2012) boats (2016) - Fabricated metal products (2010)
Switzerland: - Electrical equipment (2016) Australia: - Special-purpose machinery (2015) - Fer lizers (2012)
Listed are a selection of manufacturing projects (and application years) since 2010 where applications were rejected, have not yet been approved, or have been approved but the company is awaiting BOI agreement. Source: BOI Project List (Section 17) POLICY IMPLICATIONS Policy implications Policy implications
• Immigra on policy
Policy implications
• Immigra on policy • Diaspora strategy
Policy implications
• Immigra on policy • Diaspora strategy • Produc ve development policies for economic complexity PRODUCTIVE DEVELOPMENT POLICIES FOR ECONOMIC COMPLEXITY Traditional Industrial Policy
• Investors lack either money or adequate incentives Traditional Industrial Policy
• Investors lack either money or adequate incentives • Solution: give them credit, subsidies or tax brakes Traditional Industrial Policy
• Investors lack either money or adequate incentives • Solution: give them credit, subsidies or tax brakes • They will buy what they need Traditional Industrial Policy
• Investors lack either money or adequate incentives • Solution: give them credit, subsidies or tax brakes • They will buy what they need • Implementation: • Line item in the budget of the Ministry of Industry + selection mechanism on who to give the money to • Incentives in the tax code, and an agency to qualify firms
Traditional Industrial Policy
• Investors lack either money or adequate incentives • Solution: give them credit, subsidies or tax brakes • They will buy what they need • Implementation: • Line item in the budget of the Ministry of Industry + selection mechanism on who to give the money to • Incentives in the tax code, and an agency to qualify firms
• INDUSTRIAL POLICY IS SEEN AS AN INSTRUMENT, NOT AS A PROBLEM SOLVING MACHINE New productive development policies
• Markets for key inputs are missing (missing letters) New productive development policies
• Markets for key inputs are missing (missing letters) • This makes productivity low in the industries that need them New productive development policies
• Markets for key inputs are missing (missing letters) • This makes productivity low in the industries that need them • Giving money or incentives to firms does not address the problem New productive development policies
• Markets for key inputs are missing (missing letters) • This makes productivity low in the industries that need them • Giving money or incentives to firms does not address the problem • You need to assure the supply of what is missing New productive development policies
• Markets for key inputs are missing (missing letters) • This makes productivity low in the industries that need them • Giving money or incentives to firms does not address the problem • You need to assure the supply of what is missing • But you don’t know what it is New productive development policies
• Markets for key inputs are missing (missing letters) • This makes productivity low in the industries that need them • Giving money or incentives to firms does not address the problem • You need to assure the supply of what is missing • But you don’t know what it is • Or how to prompt its supply The problem
• I know that I don’t know The problem
• I know that I don’t know • But I still need to improve on what I am doing The problem
• I know that I don’t know • But I still need to improve on what I am doing • I can talk to those that exist The problem
• I know that I don’t know • But I still need to improve on what I am doing • I can talk to those that exist • But I cannot talk to those that do not exist because of things I am doing or not doing The problem
• I know that I don’t know • But I still need to improve on what I am doing • I can talk to those that exist • But I cannot talk to those that do not exist because of things I am doing or not doing • So, I have an information revelation problem The problem
• I know that I don’t know • But I still need to improve on what I am doing • I can talk to those that exist • But I cannot talk to those that do not exist because of things I am doing or not doing • So, I have an information revelation problem • Talking to me is not cheap • Participation constraint of others Two Different Questions
• How can the government organize itself to provide better public inputs to the monkeys that exist? Two Different Questions
• How can the government organize itself to provide better public inputs to the monkeys that exist?
• How to improve the environment for the monkeys that don’t exist? Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures • About productivity, not profitability • Win –win vs. I win – you lose Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures • About productivity, not profitability • Win –win vs. I win – you lose • Willingness to co-finance • Weed out rent-seeking Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures • About productivity, not profitability • Win –win vs. I win – you lose • Willingness to co-finance • Weed out rent-seeking • Transparency: make the “ask” public • Changes the “ask” Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures • About productivity, not profitability • Win –win vs. I win – you lose • Willingness to co-finance • Weed out rent-seeking • Transparency: make the “ask” public • Changes the “ask” • Solve the meta-problem: not one instantiation of the problem
Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures • About productivity, not profitability • Win –win vs. I win – you lose • Willingness to co-finance • Weed out rent-seeking • Transparency: make the “ask” public • Changes the “ask” • Solve the meta-problem: not one instantiation of the problem • Legitimacy: decisions based on public interest, made public
Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures • About productivity, not profitability • Win –win vs. I win – you lose • Willingness to co-finance • Weed out rent-seeking • Transparency: make the “ask” public • Changes the “ask” • Solve the meta-problem: not one instantiation of the problem • Legitimacy: decisions based on public interest, made public • Focus on things that will increase the NPV of the government • This is not a social program for the already rich!
Talking to existing monkeys: some principles
• Self-organization around common problems / possibilities • About public inputs or coordination failures • About productivity, not profitability • Win –win vs. I win – you lose • Willingness to co-finance • Weed out rent-seeking • Transparency: make the “ask” public • Changes the “ask” • Solve the meta-problem: not one instantiation of the problem • Legitimacy: decisions based on public interest, made public • Focus on things that will increase the NPV of the government • This is not a social program for the already rich! • In Japan there are over 200 deliberation councils Talking to the monkeys that don’t yet exist
• Need institutions to search the space of possibilities and the related obstacles Talking to the monkeys that don’t yet exist
• Need institutions to search the space of possibilities and the related obstacles • Beyond the existing firms Investment promotion agencies 2.0
• Version 1.0 was typically passive • Regulating foreign investment • Some adds • Handholding • One stop shop
Investment promotion agencies 2.0
• Version 1.0 was typically passive • Regulating foreign investment • Some adds • Handholding • One stop shop • Version 2.0 involves • Conversations that reveal the space of possibilities • Direct marketing • Problem solving of missing public inputs • Creation of solutions • Irish IDA • Industrial and business space • Missing skills An emerging system of coordinated = Area being worked on by a current team, supported by Harvard CID public sector capabilities needed in = Poten al area for next cohort of teams, supported by Harvard CID Sri Lanka Key Capabili es Backward reach Forward reach
Other Incen ves govt. Infrastruc- Land Target ture access firms Other govt. Investor Promo ons Target Targe ng climate/ firms response Other govt. External Export Target a aches readiness firms Other govt. Trade policy Target firms Domes c Domes c Domes c exporters exporters exporters