1. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 1

2. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 2 International Benchmarking as a Tool for Regional Policy Making: Experiences and Challenges Christoph Koellreuter Managing Director and Chief economist BAK Basel Economics www.bakbasel.com

3. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 3 Contents 1.Facing globalisation challenges: Regional level particularly important 2.International Regional Benchmarking: a necessary tool for regional policy making in an increasingly competitive world 3.An example of International Regional Benchmarking: the IBC BAK International Benchmark Club ® 4.Using International Regional Benchmarking in Regional Policy Making

4. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 4 1.Facing globalisation challenges: Regional level particularly important Continuous product and process innovation = the only successful way of high wage economies to meet the challenge of low cost competitors Innovation activity = takes place where there is a spatial concentration of companies of the same and related industries (clusters) High private productivity = i.e. internalisation of cluster specific externalities only if individuals and companies are based in the region Conclusion: policies = have to focus on maintaining and / or improving innovation friendly framework conditions at the regional level Region = economic region in the sense of an innovation, labour market or functional urban region

5. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 5 2.International Regional Benchmarking: what gets measured gets done! What is meant by benchmarking in general? = comparison / positioning in relation to a specific reference point (generally : “the best in class”) Why is benchmarking so important today? In a world having become so much more competitive, decision makers have to know and monitor their competitors (specialized in the same type of economic activity) What is quantitative international regional benchmarking? = benchmarking of economic, ecological and societal performance and policy variables as well as the relationship between the two at the level of regions What is expected from quantitative international regional benchmarking? More precise knowledge about regional strengths and weaknesses regional opportunities and threats quantitative impact of policies on economic growth, employment productivity, the environment and society of the region The ultimate hope of an international regional “benchmarker”: WHAT GETS MEASURED GETS DONE !

6. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 6 3.An example of Regional Benchmarking: the IBC BAK International Benchmark Club ® 1.What should be measured? 2.Quantitative assessment of the impact of policy variables on economic growth, productivity and employment: the analytical concept 3.Actual offer of BAK Basel Economics and perspectives for 2005

7. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 7 What should be measured? Economic performance Gross value added Hours worked Employment Output per manhour Complemented with variables of performance of the environment and the society ( = sustainable development). Necessary differentiation regions industries Policy variables Determining economic growth, productivity and employment: see analytical concept below

8. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 8 Regionales Benchmarking von BAK Basel Economics: Analyserahmen für nationale und regionale Volkswirtschaften sowie Branchen Stand August 2003 Quantitative assessment: the impact of policy variables on economic growth (at the regional, national and industry level): the BAK analytical concept Source: IBC Module Determinants 2003 Education expenditure, expenditure for R+D (national, regional) OECD/CATO Regulation indices (national) Incicators of accessibility Taxation of companies and highly skilled manpower (national, regional) Regulation of product markets Education policies. science policy, technology policy Transportation policy, infrastructure policy Tax and social policies Regulation of labour markets OECD/CATO Regulation indices (national) Labour productivity (Real Gross Value Added per man hour) GDP / Gross Value Added Hours worked per employee Employees as % of resident population Labour supply (in man hours worked) Efficiency of factor use (total factor productivity) Investment in physical capital Investment in intangible capital ICT-Capital Non-ICT- Capital Capital stocks Policy variables Control of the phenomenon of business cycles / demand Monetary policy Exchange rate policy Fiscal policy External demand (differentiated by country, region or sector) Resident population Population of working age Demography Human capital (share of employees with tertiary education) Knowledge capital (patents and bibliometric indicatros) Process capital (start-up companies) Customer capital Product marketsCapital marketsLabour markets Economic perfor- mance GDP per capita

9. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 9 The Offer of BAK Basel Economics: Overview Exclusive databases Performance: more differentiated with respect to regions and regional industries as well as more up-to-date than official statistics (Switzerland: BAK Basel Economics is the only supplier of these data, no official source available) Policy variables: generally in cooperation with renowned institutions in Europe Exclusive information and communication platform for regions in Europe: the annual forum of the IBC BAK International Benchmark Club ® taking place in June in Basel, Switzerland.

10. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 10 The Offer of BAK Basel Economics: Overview Continuation Region specific presentations, reports and platforms, i.e. Cologne: its economic profile and perspectives in the global market place (Cologne, November 2004) The Zurich Benchmarking Forum (Zurich, November 2004) Financial services as drivers of metropolitan economic growth (London, September 2004) Massachusetts and Basel / Switzerland: Two world class (Life) science based economies (Boston / Basel, Switzerland, September 2004) Regional benchmarking as a tool for Scottish economic policy (Edinborough, February 2004) The region of Veneto facing the challenges of globalisation (Venice, December 2003) International competitiveness of the Austrian federal states (Vienna, September 2003) International competitiveness of the Lorraine Region (Metz, February 2003) Reports on specific policy issues, i.e. «The international accessibility of Switzerland in danger?»

11. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 11 The Offer of BAK Basel Economics: Overview Continuation Research project «The impact of policy variables on economic growth of regions» start: autumn 2003, first major interim report: autumn 2005 Expected results should enable us to give answers to the following questions: i.e. What leads to more economic growth: a billion Euro more in transportation infrastructure or a billion Euro more for basic research? Tax reduction for companies or tax reduction of the same size for highly qualified manpower? Later on: Invitation to University institutes specialized in quantitative economic research to participate in this type of research with the support of a foundation (“Regiometrics”) still to be launched

12. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 12 The Offer of BAK Basel Economics: Overview Continuation Medium to longer term quantitative scenarios of development of the regional and national growth potential on the basis of the results of the research project “Impact of policy variables on economic growth of regions” as of autumn 2005: on the basis of the political status quo on the basis of alternative sets of assumptions regarding policy variables

13. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 13 The IBC Performance Database 350 regions in 18 EU-countries, Switzerland, Norway and United States at the NUTS 1 and 2 level; for the Extended European Alpine space (Southeast and Eastern France, Baden-Württemberg, Bavaria, Austria, Northern Italy and Switzerland) generally also at the NUTS 3 level 60 industries in the above mentioned 350 regions Gross value added at current, constant prices as well as industry specific purchasing power parities, employment, hours worked, output per man hour, labour cost and unit labour cost for regions in the Extended Alpine Space as a part of project MARS «Monitoring the Alpine Regions’ Sustainability» led by the Lead Partner BAK Basel Economics in the framework of the Interreg IIIB programme Alpine Space of the European Commission Regions Industries Variables of economic performance of national/ regional economies as well as the 60 industries Variables of the performance of the environment and society

14. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 14 The IBC Policy Variables Database Policy area «INNOVATION»:Education, science and technology policy Indicators: Innovation resources: Expenditure on research and development as percent of regional GDP Sum of scores of Shanghai Index of the research quality of the 500 best universities in the world Part of employment with tertiary education (total and by industry) Part of employment with secondary education (total and by industry) Innovation processes: Patents (total and by industry) Bibliometric indicators (total and by research field) Company start-ups (total and by industry) Coverage end of 2004:140 regions in 21 countries Partner institutes:ISI Fraunhofer Institut, Karlsruhe Dun & Bradstreet

15. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 15 Policy area «TAXATION»:Fiscal and social policy Indicators:Tax burden of companies and highly qualified manpower Coverage end of 2004:65 regions in 21 countries Partner institute:ZEW Center for European Economic Research, Mannheim Policy area «REGULATIONS»:Regulatory policies Indicators:OECD Regulation Indices for product and labour markets; backward and forward extrapolation with the CATO Indices for Economic Freedom Coverage end of 2004:21 countries Policy area «ACCESSIBILITY»:Transport and infrastructure policy Indicators:Indicators of intercontinental and interregional (European) accessibility Coverage end of 2004:250 regions in 21 countries Partner Institute:IVT Institute for Transport Planning and Systems of ETH Federal Polytechnical Institute, Zürich The IBC Policy Variables Database Continuation

16. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 16 Possible extensions of the IBC Policy Variables Database Intraregional accessibility Regional land use regulations Structure of government: indicators of political fragmentation and the degree of centralization / decentralization Culture Social capital

17. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 17 The IBC Sectoral Databases Benchmarking of tourism Tourism specific variables of performance and determinants for 25 Alpine Holiday Regions and 20 European cities Monitoring Life Sciences Locations Life Science specific performance variables and determinants for 15 countries and 15 Life Science regions Benchmarking of investment goods industries locations Investment goods industries specific performance variables and determinants for selected regions in Western Europe, North America, Central and Eastern Europe Monitoring Financial Services Locations Still open

18. OECD World Forum “Statistics, Knowledge and Policy”, Palermo, 10-13 November 2004 18 4.Using International Regional Benchmarking in Region Policy Making Used by whom? Representatives of public bodies at the national, regional, sub regional level as well as industry associations, companies and other parties interested in influencing policy decisions at the regional and national level Last but not least: citizens of regions and countries Used for what? SWOT analyses Elaboration and evaluation of regional visions and strategies Introduction of more objectivity into the discussion of location and competitiveness related issues As an input into lobbying of the region at the upper level government