Business Competitiveness: A 21st Century Model for the Caribbean Presented to the ECCU Business Symposium and Innovation Forum St Kitts and Nevis Tuesday October 22, 2013

Structure of Presentation A Working Definition Theorising Competitiveness –19th and 20th century models Michael Porter’s Diamond and Five Forces Model The Global Competitive Index model Is there a Caribbean model of Business Competitiveness?

Definitions World Economic Forum’s Global Competitiveness Report: competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country (GCR 2103/2014, p. 3 Harvard Business School’s Institute for Strategy and Competitiveness : a nation’s competitiveness…..is based on the productivity with which it produces goods and services.

From Absolute to Comparative to Competitive Advantage Absolute Advantage – Adam Smith 1776 Comparative Advantage – David Ricardo 1817 Competitive Advantage – Michael Porter 1990

Absolute Advantage or “Anything you can do I can do better” Countries should specialise in what they have absolute advantage in due to natural advantage (land, labour, capital) Inefficiencies in production process Results in reduced or no trade

Comparative Advantage Countries should produce those items they can make most efficiently even if other countries can produce the item more efficiently. Small economies could not be competitive Presumes bilateral trade, full employment Transportation Costs not included

Firm Level Competitiveness – Porter’s Diamond Determinants of Global Competitive Advantage: The Porter Diamond Demand Conditions Factor Related and Supporting Industries Firm Strategy, Structure, and Rivalry Source: International Business : Environments and Operations ,Daniels and Radebaugh

PORTER’S CONDITIONS FOR COMPETITIVE SUPERIORITY Demand conditions—observation of need or demand usually in home country production started near the observed market Factor conditions— availability and terms for acquiring them Related and supporting industries—existence of infrastructure Firm strategy, structure, and rivalry influenced by other three conditions Existence of the four favorable conditions does not guarantee that an industry will develop in a locale Absence of one of the four conditions from a country may not inhibit companies from becoming globally competitive

Industry Competitiveness Porter’s Five Forces

What of the Caribbean?

Wint’s (2003) Model of Competitiveness for SIDS in the Caribbean Alvin G. Wint, Competitiveness in Small Developing Economies, 2003 ,UWI Press

World Economic Forum Global Competitiveness Index (2013) Definition of competitiveness as the set of institutions, policies, and factors that determine the level of productivity of a country (GCR 2103/2014, p. 3) Competitiveness of a country measured based on 12 Pillars (Factors)

Global Competitive Report 12 Pillars of Competitiveness Quality of Institutions Infrastructure Macroeconomic Environment Health and Primary Education Higher Education and Training Goods Market Efficiency Labour Market Efficiency Financial Market Development Technology Development Market Size Business Sophistication Innovation

Caribbean Competitiveness A Human Capital Development Approach

Competitiveness Based on Innovation In the current context, policymakers must avoid complacency and press ahead with the structural reforms and critical investments required to ensure that their countries can provide a prosperous environment and employment for their citizens. They must identify and strengthen the transformative forces that will drive future economic growth. Particularly important will be the ability of economies to create new value-added products, processes, and business models through innovation. Going forward, this means that the traditional distinction between countries being “developed” or “developing” will become less relevant and we will instead differentiate among countries based on whether they are “innovation rich” or “innovation poor.” It is therefore vital that leaders from business, government, and civil society work collaboratively to create enabling environments to foster innovation and, in particular, to create appropriate educational systems ( Source: Global Competitiveness Report 2013-2014, p. xiii)

5th Pillar – Higher Education and Training - Barbados INDICATOR MEASURE RANK/148 Secondary education enrollment, gross %* 103.7 23 Tertiary education enrollment, gross %   61.8 33 Quality of the educational system 5.3 6 Quality of math and science education 5.5 9 Quality of management schools 5.1 26 Internet access in schools 38 Availability of research and training services 4.7 41 Extent of staff training 4.5 32

9th Pillar of GCI – Technology Development - Barbados INDICATOR MEASURE RANK/148 Availability of latest technologies 5.9 28 Firm-level technology absorption 5.2 44 FDI and technology transfer 5.0 35 Individuals using Internet, %* 73.3 32 Fixed broadband Internet subscriptions/100 pop.* 23.8 27 Int’l Internet bandwidth, kb/s per user* 69.5 33 Mobile broadband subscriptions/100 pop.* 36.4

12th Pillar of Competitiveness – Innovation - Barbados INDICATOR MEASURE RANK/148 Capacity for innovation 3.4 81 Quality of scientific research institutions 4.2 45 Company spending on R&D 3.0 78 University-industry collaboration in R&D 4.3 39 Gov’t procurement of advanced tech products 3.6 54 Availability of scientists and engineers 63 PCT patents, applications/million pop.* 11.3 32

Modified Model of Competitiveness for the Caribbean Global Competitiveness Macroeconomic Stability Infrastructural Development Firm Level Competitiveness Innovation Higher Education and Training Technology Development

The Third Prong in the Growth Strategy for the ECCU Transportation Energy Environment Education and Skills Training Research and Development Information Technology Governance Source: Hon Sir Dwight Venner, ECCB Annual Report, 2012/2013

OECS expenditure on Education Relatively high (approx. 5% of GDP) compared to other CARICOM countries Almost 100% achievement of MDG of universal primary education Better outcomes from expenditure could be gained including more targeted programmes Increasing or introducing user fees at tertiary level The Eastern Caribbean Economic and Currency Union Macroeconomics and Financial Systems, Alfred Schipke, Aliona Cebotari, and Nita Thacker, IMF, 2013

Focus on Higher Education and Training in the OECS Innovation and Technology Development are enabled by Higher Education and Training Increased numbers of persons in Higher Education directly proportional to development indices (HDI; GCI) Investment in Higher Education and Training has to be a Public Private Partnership in the OECS and wider Caribbean Higher Education and Training must Enhance Entrepreneurship and Develop Entrepreneurial Behaviours.

Do countries with higher income per capita have higher tertiary enrollment rates? Most countries with a GNI pc higher than $20,000 have tertiary GERs higher than 50%. Most countries with gross national income (GNI) per capita less than $1000 have tertiary GERs less than 11%. Tajikistan (20%) and Kyrgyz Rep (49%) are the two exceptions. Countries with GNI pc more than $20,000 have tertiary GERs higher than 50% except for Qatar (10%), Luxembourg (10.5%), Brunei (17.2%), and Liechtenstein (36.0%). http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary

Which countries have the lowest tertiary enrollment rates? These countries have less than 4% of tertiary age students enrolled in tertiary education. 33 countries have less than 10 percent of tertiary age youth enrolled. 50 countries have more than half of tertiary age youth enrolled. 8 countries have tertiary GERs higher than 80% and 4 countries have tertiary GERs higher than 90%: Finland, the United States, Cuba, and Korea, Rep. 10 Countries with the Lowest Tertiary Gross Enrollment Rates (2008-2011) 1 Turks and Caicos Islands 0.08 2 Malawi 0.72 3 Niger 1.51 4 Eritrea 1.99 5 Tanzania 2.11 6 Chad 2.17 7 Central African Republic 2.57 8 Burundi 3.25 9 Afghanistan 3.33 10 Dominica 3.57 Source: UNESCO Institute for Statistics in EdStats, Nov. 2012 Notes: Figures are most recent year with data between 2008-2011. Purple = 2011; Black = 2010; Blue = 2009; Green = 2008. Data were not available for 72 of 214 countries. http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary

The Road to being Innovation Rich Focus on higher education linked to national goals (agriculture, agriprocessing, transportation, Tourism, Financial Services) Private Sector should partner with the Public sector for HE, skills training, R&D Financial Sector should support innovation, entrepreneurship, financing for SME’s

EPILOGUE TESSA’S STORY

References Daniels, J and Radebaugh, L (2012) International Business:Environments and Operations, Pearson. ECCB Annual Report, 2012-2013 http://www.eccb-centralbank.org/PDF/ar_2013.pdf Schipke, A., Cebotari, A. Thacker, N., (2013) Eastern Caribbean Economic and Currency Union: Macroeconomics and Financial Systems, IMF. Schwab, Klaus (2013) World Economic Forum: The Global Competitiveness Report 2013-2014. http://www.weforum.org/reports/global-competitiveness-report-2013-2014 Wint, A (2003) Competitiveness in Small Developing Economies, UWI Press. Harvard Business School Institute for Strategy and Competitiveness. http://www.isc.hbs.edu/index.html UNESCO, Edstats http://web.worldbank.org/WBSITE/EXTERNAL/TOPICS/EXTEDUCATION/EXTDATASTATISTICS/EXTEDSTATS/0,,contentMDK:21528857~menuPK:4324013~pagePK:64168445~piPK:64168309~theSitePK:3232764,00.html?tertiary

THANK YOU