OCTOBER 2015 N° 30 PERSPECTIVES DE POLITIQUE ÉCONOMIQUE Stability in a climate ofrisk inaclimate Stability REPORT COMPETITIVENESS 2015 OCTOBER 2015 OCTOBER PERSPECTIVES N° 30 DE POLITIQUE ÉCONOMIQUE 2015 COMPETITIVENESS REPORT Stability in a climate of risk The ‘Perspectives de Politique Économique’ series includes reports, studies, research results or summaries of conferences commanded by or carried out by employees of the Ministry of the Economy or by experts of associated institutions. The opinions expressed in these publications are those of the authors and do not necessarily correspond with those of the Ministry of the Economy. For any request or suggestion, please contact the Observatoire de la compétitivité of the Ministry of the Economy of the Grand Duchy of Luxembourg. Ministry of the Economy Observatoire de la compétitivité 19-21 Boulevard Royal L-2449 Luxembourg [email protected] October 2015 ISBN: 978-2-919770-21-2 This publication can be downloaded from www.odc.public.lu © Ministry of the Economy, Luxembourg 2015 Competitiveness Report The following persons contributed to this publication: Serge ALLEGREZZA Ministry of the Economy/STATEC Marc FERRING Max JENTGEN Giulia SPALLETTI Pierre THIELEN Ministry of the Economy Claude LAMBORAY STATEC Chiara PERONI Leïla BEN AOUN Xi CHEN Umut KILINC Tatiana PLOTNIKOVA Cesare RIILLO Francesco SARRACINO ANEC 3 2015 Competitiveness Report Introduction There are several indicators which allow for a resolutely optimistic reading of the current economic situation in Luxembourg. The GDP growth rate should come closer to the long-term average, which stood at 3.5% per year from 1990 to 2014. This performance stands out when compared to that of other eurozone Member States. We are right to rejoice in this, although we must remain aware of all negative risks. Outside of the European Union there is geopolitical turmoil in the Middle East and at the Russian borders, and emerging countries are slowing down, particularly China. Within the European Union we are facing Brexit, new fiscal competition rules, public and private debt management, etc. The Organisation for Economic Cooperation and Development (OECD) has published its report on the situation of our economy. The OECD observed that our economy has withstood the effects of the financial and banking crisis, thanks to the transformation of the financial sector and multi- sectoral specialisation, focusing on dynamic and promising sectors as a priority. The government’s policies have therefore been extremely sound. But we must not rest on our laurels. As Jeremy Rifkin put it: ‘We are, it appears, in the early stages of a game-changing transformation in economic paradigms. A new economic model is emerging in the twilight of the capitalist era that is better suited to organise a society in which more and more goods and services are nearly free.’ We are witnessing a paradigm change which Rifkin calls ‘The Third Industrial Revolution’, which is going to change the way we work, consume, move around and learn. The government aims to prepare our country for a constantly changing environment, with a long-term economic vision, developing a Luxembourg 3.0 (or even 4.0) strategy. Governing means anticipating! It is our duty to help future generations by establishing good framework conditions so that the growth potential in our economy can be harnessed and compet- itiveness ensured in an international context. Luxembourg already has strong foundations for establishing this new economic model. Significant efforts have been made during the past decade in the ICT, logistics and energy sectors. Now, we must ensure the that these technologies converge in a smart grid. This will be a decisive factor for growth and will allow us to distribute resources more efficiently, with the end goal of improving the efficiency of our economy. 4 2015 Competitiveness Report The Observatoire de la compétitivité analysis ensures detailed and regular monitoring of these decisive factors for growth in our economy, as well as its degree of competitiveness compared to our main trading partners. According to the results from this 2015 edition of the national Competitiveness Scoreboard, which is one of the tools used to analyse structural competitiveness, Luxembourg is ranked 6th out of the 28 EU Member States. We can be proud of this result. After over a decade of good and faithful service following its foundation by the Tripartite Coordination Committee, the scoreboard which acts as the main focus of the Report is now being revised, in partnership with social partners in the Economic and Social Committee (ESC). I expect to receive the new, modernised and structured scoreboard in the near future. The Observatoire also monitors dozens of benchmarks and international rankings where Luxembourg is among the countries taken into consid- eration. We need to monitor these indicators both for ‘nation branding’ purposes, i.e. to monitor the brand profile of our country at international level, and to help us to pinpoint our weaknesses so that we can improve our country’s performance. In the 2015 edition of the Report, the Observatoire has also devoted a chap- ter to following up on the impact assessment for new priority sectors which the government is actively developing. This study will be useful in light of the critical analysis of the economic diversification policy we will be launching shortly, which we may need to review if necessary. In conclusion, the Competitiveness Report is an interesting and reward- ing read which, in particular, will provide food for thought and prepare us for the upcoming debate on competitiveness at the Chamber of Deputies, as well as for discussions between the government and social partners during the national social dialogue procedure established as part of the European Semester framework. Francine Closener Secretary of State for the Economy 5 2015 Competitiveness Report Table of contents 1 The Observatoire de la compétitivité 7 2 Benchmarks and comparative competitiveness analysis 15 3 The Competitiveness Scoreboard 63 4 Luxembourg in the European Semester 109 5 The economic impact of the 5 new priority sectors 163 6 Thematic studies 215 7 Appendix – Competitiveness Scoreboard: Definitions 237 6 2015 Competitiveness Report 1 The Observatoire de la compétitivité 1.1 The Observatoire de la compétitivité: Role and missions 8 1.2 From the Lisbon strategy to the Europe 2020 strategy 9 1.3 Agency for standardization and the knowledge economy (ANEC) 10 1.4 Events and publications in 2014-2015 10 1.5 An overview of the 2015 Competitiveness Report 13 1.1 The Observatoire de la compétitivité: Role and missions The role of the Observatoire de la compétitivité is to assist the Government and the social partners in providing guidelines and formulating policies that promote and/or are suited to the concept of long-term competitive- ness, which is the source of growth and well-being. As such, it is a tool for documenting, observing and analysing evolution in the country’s competitive position. It is a monitoring unit, responsible for leading a constructive debate between the social partners. The main tasks of the Observatoire de la compétitivité are as follows: Collect, analyse and compare existing data on the national, regional and international levels that relate to economic competitiveness; Accurately target the dissemination of selected and processed information, which is useful for strategic decision-making; Undertake or commission studies and research on competitiveness, its factors, etc.; Contribute to the works and to the analyses of international organ- izations dealing with competitiveness (EU Council, OECD, etc.); Coordinate the work and the drafting of the Luxembourg’s National Reform Programme (NRP) within the framework of the European Strategy for Growth and Jobs (Lisbon strategy and Europe 2020 strategy). 8 1. The Observatoire de la compétitivité 1.2 From the Lisbon strategy to the Europe 2020 strategy Within the Government, the Minister of the Economy is responsible for coordinating the implementation of the European strategy for growth and jobs on the national level. The Observatoire de la compétitivité was commissioned in the autumn of 2005 to prepare the National Plan for Innovation and Full employment1, which was submitted to the European Commission within the framework of the Lisbon strategy. In order to optimize government coordination, to ensure consultation procedures and to guarantee assimilation of reforms nationally, an ad hoc structure was set up at the inter-ministerial level in 2005, whose structure is coor- dinated by the Observatoire de la compétitivité. This network brings together Lisbon strategy coordinators within each of the relevant ministerial departments and administrations concerned. The Government then submitted annual implementation reports to the Commission, until the Lisbon strategy expired in 2010. At the end of 2009, the European Commission began the works to define a new strategy for the next decade: the Europe 2020 strategy2. Based on European Commission proposals, the June 2010 European Council decided upon the development of this new strategy, the governance of which will take place at three integrated levels: A level of macroeconomic monitoring to focus on macroeconomic and structural policies; A thematic coordination level, covering the five major European objectives and their national implementation; A simultaneous monitoring level, taking place within the framework of the Stability and Growth Pact (SGP).