competitiveness and growth in brazilian cities

8/6/2019 Competitiveness and Growth in Brazilian Cities

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What Can Cities Do to Promote

Competitiveness?

Ming Zhang

Sector Manager

Urban Development, Water Supply & Sanitation

South Asia Region

World Bank

Results from the Study on City

Competitiveness and Growth in Brazil


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What Can Cities Do to Promote

Competitiveness?

Concept: What drives city economicgrowth, and what is the role ofgovernment?

Process: How to facilitate the creation ofa unique local environment for

competitive advantage?

Actions: What specific actions are oftenundertaken?


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Concept

What drives city economicgrowth, and what is the role of

governments?


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Competition: More Global and Intensive

1.46 billion increase in global workforce

lower transport cost: saving from airfreight &containerization = 12% of value of shipped goods

Growth of FDI = 2 growth rate of world trade =2 growth rate of world income

Vertical disintegration: firm outsourcing global

value chain

Diminution of manufacturing, and shift incomposition of manufacturing

Non-tradeable Tradeable


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What Is City Competitiveness?

City competitiveness is the productivity

(value per unit of input) with which a city

uses its human, capital, and naturalresources.

Source: Porter


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What Determines City Competitiveness?

COMPETITIVENESS

Macroeconomic

environment

Historical legacy

Strong tendency for

competitive advantages

to endure (e.g. SE v- NE

Brazil)

Localized increasing

returns (agglomeration

& localization econs)

Capacity to reinvent

Innovation

Human capital

Clustering; knowledge

spillovers

Local competition

Infrastructure/Physical

capital; governance; otherfactors


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Innovation- the key to competitiveness

and location factors critical

Knowledgesharing &

exchange

Learning by

observation

Learning by

talking and face

to face

communication

Learning thru

leaving

Knowledge disseminationfacilitated by proximity in

distance & clustering of

economic activities

Knowledge sharing andexchanges increased synergy

among firms

Endogenous growth theory

self-sustaining growth withco-learning by agents

But also coordination failure

role for other players (e.g.

industry university)

Sources: Lucas (1988); Feldman and Audretsch

(1999) & OECD (2006)


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Innovation Hi-Tech Impossible for all cities to compete byspecialising in new knowledge & R&D

intensive industries

But, knowledge upgrading not confined tohigh-tech industries- e.g. the Dutchflower cluster

there is no such thing as a low-techindustry. There are only low-techcompanies- that is, companies that fail touse world-class technology and practices toenhance productivity and innovation(Porter,1998, p 89)


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Local Competition and Innovation

Overwhelming evidence of positive effectof local competition on innovation &competitiveness (Glaeser, 2000)

local competition pressure for firms toinnovate more competitive globally

local competition also aidscompetitiveness by allowing consumers &

firms to compare & monitor (Porter, 1998)

Type of competition important: e.g. costcutting versus upgrading


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Local competition- moving from

comparative to competitive advantage

0

10

20

30

40

50

60

70

Developed countries Developing countries

Factor conditions

Demand conditions

Related & supplyindustries

Strategy &competition

Other

Source: van der Linde (2003)


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Policy- what are the lessons?

Lesson 1: while infrastructure quality and low costs of doing

business remain important, they are not sufficient:

Lower cost of doing business + Added value for business

Lesson 2: importance of a facilitating environment which: places a premium on human capital

exploits knowledge sharing and exchange, and local synergies,and overcoming coordination failures

creates a culture and pressure for firms to innovate and learn

Lesson 3: be distinctive- build competitiveness in areas with

pre-existing possibility of competitive foothold

Lesson 4: need for credible policy vision which sends clearsignals self fulfilling prophecy


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What Can City Governments Do?

Institution

Improve public services (education, health, publicsecurity, housing, etc.)

Reduce bureaucracy

Infrastructure Improve infrastructure (transport, tele-

communications, energy, water & sanitation)

Localized Intervention

For cities with (potential) economic dynamics, howto promote competitiveness?

An effective form is the Cluster approach, withemphasis on innovation and synergies between

local firms


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What Is a Cluster?


14/32Working Together

Supplier Networks

Firms supplying raw-materials,parts, components, and services

LeadingFirms

Trade and

export products &services outside region

Economic Competitiveness Group, Inc.

Whats a

Cluster?

Economic Base

TechnologyFinancial

Resourcesand Capital

BusinessEnvironmentHuman

ResourcesInfrastruc-

ture


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The Napa Wine Cluster

Sources: California Wine Institute, Internet search, California State Legislature. Based on research by MBA 1997 students R.

Alexander, R. Arney, N. Black, E. Frost, and A. Shivananda.

Educational, Research, & TradeOrganizations (e.g. Wine Institute,

UC Davis, Culinary Institutes)

Organizations (e.g. Wine Institute,Educational, Research, & Trade

UC Davis, Culinary Institutes)

Growers/Vineyards Wineries/ProcessingFacilitiesGrowers/

Vineyards

Wineries/

Processing

Facilities

State Government Agencies

Production and Economy)

(e.g., Select Committee on Wine

Winemaking Equipment

Barrels

Labels

Bottles

Caps and Corks

Public Relations andAdvertisingAdvertising

Specialized Publications(e.g., Wine Spectator,

Trade Journal)

Specialized Publications

Trade Journal)

Food Cluster

Tourism Cluster

Winemaking Equipment

Barrels

Labels

Bottles

Caps and Corks

Public Relations and

(e.g., Wine Spectator,

Food Cluster

Tourism Cluster

Grapestock

Fertilizer, Pesticides,HerbicidesHerbicides

Grape HarvestingEquipmentEquipment

Irrigation Technology

California AgriculturalClusterCluster

Grapestock

Fertilizer, Pesticides,

Grape Harvesting

Irrigation Technology

California AgriculturalCluster


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Manufacturers of LeatherItems

SyntheticFootwearManufacturers

LeadProducts

Suppliers ofComponents

TanneryChemical

ProductsMetalOrnaments

Suppliers ofEquipment

Sewing cuttingMachines

ServiceProviders

MachineMaintenance Design and

ITLaboratories

Freight &Logistic

Recycling

Recycling

SupportingAgencies

Other

SuppliersPacking Printing Textiles

PlasticInjectors

MoldersPressKnives

SEBRAE BNB SENAI Sindindustria Centec University

Marketing

Buyers

(Wholesalers

and retailers) L

A

B

O

R

Firewoo

d

Cariri Footwear Cluster, CE, Brazil


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Cariri Footwear Cluster


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Process

How to Facilitate the Creationof a Unique Local Environmentfor Competitive Advantage?


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Sao Luis: Global Value Chain not Benefiting Local Economy


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Separated Local Supply Chains andInternational Value Chains

Local Supply Chains

Universities

Global Research NetworkGlobal Value Chain

Multi-nationalCompanies

2006 Economic Competitiveness Group, Inc.

Global

Local

No Linkage, No Benefits


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Global Value Chain

Universities

Global Research Network

Clusters as a nexus of local supply chains andinternational value chains

Local Supply Chains

Multi-nationalCompanies

2006 Economic Competitiveness Group, Inc.

Global

Local

AppliedResearch

SpecializedTrainingCenters

New SupplyNetwork

Joint

Marketing

SME Support

Center /Incubators

IFC =Institution forCollaboration


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Cluster Working Process

Analysis(Fact Books)

EconomicDiagnosis

MarketOpportunities

ActionModels

IntegratedStrategy and

ImplementationPlan

Regional

LeadershipProcesses

Arrange

ClusterGroups

Expand

Public-PrivateParticipation

Cross-Cutting

NeedsIdentified

Form RegionalFlagship andImplementation

Mechanism

CollaborativeClusterActions

ClusterWorking Group

Processes

ClusterChallenges

Vision andCompetitive

Requirements

RegionalClusterAction

Strategy


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Cluster Process

Ensure participation of representatives ofkey cluster stakeholders, especially theprivate sector (starting with clustermapping)

Trust building essential Action-oriented, looking for quick wins

and short-term results

Careful design of process to ensure the

right balance of sound analysis,participation and results-orientation

Important role of cluster leaders andfacilitators


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Actions

What are some of the typicalactions that cities undertaketo promote competitiveness?


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Possible Joint Actions by Clusters

(Example: Colorado State)

Co-inform

Co-learn

Co-market

Co-purchase

Co-produce

Co-build economic foundations

No one size fits all: Production vs. service Knowledge intensive vs. capital intensive New vs. mature Existing vs. potential Clusters of SME Majority vs. Cluster of Mass Production

Source: Waits 2000


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Different Policies for Different Clusters

Survival Clusters of Micro and Small-scale Enterprises

Identify collective projects; Incentives for joint activities;

Build trust and identify common interests.

Differentiated Mass Production Clusters

Intensify inter-firm cooperation; Provide information and advisory services;

R&D and technology development

Clusters of Transnational Corporations

Promotion to attract further FDI

Local supplier development

Conscientious efforts to transfer technology to localfirms

Source: Altenburg and Meyer-Stamer 1999


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Examples of Specific Actions

Joint marketing and export promotion

Value chain integration

SME assistance and industrial extension

R&D support: incubators, center for technologiesand innovation, facilitation of university-industrytechnology transfer

Training and skills development for labors

Industrial districts or technology parks Developing specialized infrastructure or services

Community economic development measures withfocus on depressed communities or disadvantaged

groups


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Example: MarketingOnline Property Locator and Market Information


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Exemple: SME Support and industrial extension

BP Entrepreneur Center in Azerbaijan

In 1994 BP signed a contract with Azerbaijan forexploring oil and gas

Tried to support local private sector to be able towork with BP as suppliers

One-stop shop where local suppliers can obtaininformation, training, and technical assistance forbidding of contracts by BP and other majorcompanies.

2003-2006: 1606 new business contracts ($249million) awarded to local small companies

562 SMEs received training


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Exemple: R&D Support

Center for Information and Technologies (CITE)

Center for technology and knolwdge transfers,oriented for SME

In situ Offer services, knowledge and technology

transfer, according to standards, testing,assistance on commercial development andexport

Training Very focused: leather and shoes, wood and furniture,

artesans, metals (metal-mechanic), textile material, fruit,packaging, agriculture industry, software, logistics

Private run Capital equipment grant, costs recovered through

user fees Spain (pioneer), Peru, Dominic Republic, Croacia,

Slovenia, Honduras, Colombia, Mexico, Brazil

I i i f Ci C i i


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Institutions for City Competitiveness Reorganize or coordinate government services to

clusters: often are fragmented

Local Economic Development Agencies: differentmodels

Private, non-profit company: The Right Place Program inGrant Rapids, Michigan

Local government owned commercial company: GreaterLondon Enterprises Ltd

Local Economic Development Agencies: bringing togetherstate, municipalities, chambers and commerce, NGOs,financial institutions

Regional Competitiveness Council (e.g. Massachusetts):private businesses, higher education, financialinstitutions

Regional Development Agencies: UK

Reorientation of state and municipal agencies forclusters: e.g. Colorado


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Summary: What Can Cities Do?

Information: understand the market and trend,

Stratregy: establish a credible vision for the uniquevalue position of the city

PPP: Talk to the local private sectors in a structured

way; focus on PPP to supplement the roles of privatesector

Action: avoid over-analysis, focus on quick winsand low-hanging fruits

Avoid excessive government interventions:waste of resource and undermining competitiveness

Capacity: matching actions/risks with capacity

competitiveness and growth in brazilian cities

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