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Enhancing national market
participation and
competitiveness
-
A framework for dialogue
between business and
governments

Overview presentation – February 2012
Context

• Large investments can provide an
opportunity to catalyze local economic and
social development
• Linkages with local and
national suppliers are a primary
development enabler
• Many large investors are building linkages
with local suppliers for commercial and
strategic reasons
• National supplier participation is seen as
a key policy objective by many host
governments
• Growing use of local content rules to
mandate relationships with local
suppliers
                                               2
Key questions at the outset


• What are the ways in which
local firms and economies
could participate in, and benefit
from, large inward investments
in their countries?

• What are the parameters to maximize the
developmental benefits of these large
investments?


                                            3
Competitiveness

• Key value chains ofparticipation of localand of
in the
       enabler of the
                      large investments
                                            firms

local economic development more broadly.

• What is competitiveness? The ability of a
firm to deliver orders with levels of cost,
scheduling, reliability, and quality equal to, or
better than, those of its peers, and to win
contracts in an open market.

• Investing companies and host governments
often have closely aligned interests and
shared objectives in enhancing local firm
capabilities and competitiveness.

                                                    4
Shared interests of enhanced local firm participation

COMPANY                                                                        GOVERNMENT
          •Strong relationships with
          governments and local                               •Sustainable economic
          stakeholders                                        development & higher
                                                              living standards
          •Optimize costs and
          performance in supply                               •Maximize employment
          chains                         SHARED               opportunities
          •Meeting project             INTERESTS              •Maximize use of national
          schedules                                           suppliers
          •Meeting technical & HSE                            •Develop strategic
          standards                                           industries
          •Access future business                             •Technological
          opportunities                                       development




             •National suppliers competitive to international standards
             •Reliable local supply chains
             •Highly skilled workforce
             •Improved local technological capacity
How best to realize those shared interests?

• Shared interests are best
realized through working to
improve the competitiveness
of local firms rather than
through mandatory
requirements (‘local content
rules’).

• Local a short term increase
lead to
        content rules may

in local firm participation and employment.

• However...
                                              6
Local content rules
While some isolated successes, many potential downsides,
such as:

• Increased investment costs and risks
• Uncompetitive local industries
• Reduced foreign direct investment
• Higher prices for consumers
• Reduced long-term employment
• Exacerbation of corruption
                                                           7
WBCSD Framework – 1
• Framework for dialogue between to
investing companies and governments
enhance local firm competitiveness.

• Based on identification of the shared
interests of companies and governments to
facilitate a constructive dialogue on
appropriate policy and corporate
responses, and, in some cases,
coordinated or collaborative actions.

• Provides a tool for engaging with government,
using evidence-based insights and proven strategies
to foster competitiveness.
                                                      8
WBCSD Framework – 2

• Offers a stepwise process and a to
of options for investing companies
                                   menu

pursue this dialogue.


• Does not make specific prescriptions for
managing the relationship with government.


• Applicable for a broad range of sectors,
geographies and scales of investment.

• Target audience: country/operational
management, public affairs, supplier development
functions
                                                   9
Key features of the WBCSD Framework
• Analysis interests of interests and objectives – Starting point: identification of
            of shared
the shared               companies and governments

• Drivers of competitiveness – Simple modelplatformkey microeconomic and
                                            of the
macroeconomic drivers of competitiveness as         for a more focused
dialogue on priority areas for improvement.

• Menugovernments and other stakeholders to support realization of shared
       of potential actions – Identification of appropriate actions by companies
and by
objectives.

• Metrics – Measurement model to help evaluate progressperformance of local
                                                          and to guide effective
management of actions. Also: set of metrics to assess the
firms & impacts on local economic development and the business of investing
companies.

• Case studies –capacity development.
                  Demonstrate the contribution of WBCSD member companies to
sustainable local



                                                                                       10
Supporting improvements in local firm
competitiveness: A virtuous circle
The Framework
Metrics
   INPUTS TO        OUTPUTS IN
   ENHANCED          ENHANCED        OUTCOMES
COMPETITIVENESS   COMPETITIVENESS




                        COST
 MICROECONOMIC
    DRIVERS
                     SCHEDULING
                                    LOCAL ECONOMIC
                     RELIABILITY     DEVELOPMENT

                      QUALITY         IMPACT ON
                     ASSURANCE        INVESTING
                                      COMPANIES
MACROECONOMIC         CONTRACT
   DRIVERS             AWARD
Development benefits

• Sustainable economic development
• Long-term employment creation
• Higher productivity and living standards
• Technology cooperation & increased
absorptive capacity

• Positive spillovers from key
interventions
    Educationinfrastructure
               & training
    Improved enabling environment
    Business                                14
Challenges

Employment outcomes:
• Short-term: higher, morereductions employment
              no effect or
• Long term:               sustainable
growth in the sector and beyond


Mismatch with investment cycle:
• Manyand services (e.g. during upfront demand for
goods
         investments have large
                                   construction)
• Insufficient time for building capacity to participate
• Potential solutions: early analysis, operational phase
procurement strategies, linking with
                                       appropriate


                                                           15
Why use the Framework as basis for
dialogue?
• Maximization of investor contributions –    Impact of
many investor-led programs to improve local firm capabilities
and competitiveness is often determined by the enabling
policy environment


• Collaborative action – Training and skills development
partnerships, cluster formation, etc. require a level of formal
collaboration

• Developing better policies – Effective and information
policies and programs often need insight
                                         government

which only the private sector holds (e.g. employment and
training needs)

                                                                  16
3 objectives of the WBCSD Framework
• Move the discussion of national market
participation past negotiations over
restrictive requirements and towards a
search for strategies and actions that
achieve long-term benefits for both sides.

• Transform what can be an to one that is
relationship with government
                             adversarial

cooperative and can draw in other partners
from the public, private and nongovernmental sectors.

• Broaden the national market participation discussion to
include spillover benefits to firms that may be outside the
investing companies’ supply chains.

                                                              17
Download this WBCSD tool at
http://www.wbcsd.org/work-program/development.aspx




                             Matthew Lynch
                             lynch@wbcsd.org
                             +41 22 839 31 94

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WBCSD tool for dialogue between business and governments on supplier competitiveness

  • 1. Enhancing national market participation and competitiveness - A framework for dialogue between business and governments Overview presentation – February 2012
  • 2. Context • Large investments can provide an opportunity to catalyze local economic and social development • Linkages with local and national suppliers are a primary development enabler • Many large investors are building linkages with local suppliers for commercial and strategic reasons • National supplier participation is seen as a key policy objective by many host governments • Growing use of local content rules to mandate relationships with local suppliers 2
  • 3. Key questions at the outset • What are the ways in which local firms and economies could participate in, and benefit from, large inward investments in their countries? • What are the parameters to maximize the developmental benefits of these large investments? 3
  • 4. Competitiveness • Key value chains ofparticipation of localand of in the enabler of the large investments firms local economic development more broadly. • What is competitiveness? The ability of a firm to deliver orders with levels of cost, scheduling, reliability, and quality equal to, or better than, those of its peers, and to win contracts in an open market. • Investing companies and host governments often have closely aligned interests and shared objectives in enhancing local firm capabilities and competitiveness. 4
  • 5. Shared interests of enhanced local firm participation COMPANY GOVERNMENT •Strong relationships with governments and local •Sustainable economic stakeholders development & higher living standards •Optimize costs and performance in supply •Maximize employment chains SHARED opportunities •Meeting project INTERESTS •Maximize use of national schedules suppliers •Meeting technical & HSE •Develop strategic standards industries •Access future business •Technological opportunities development •National suppliers competitive to international standards •Reliable local supply chains •Highly skilled workforce •Improved local technological capacity
  • 6. How best to realize those shared interests? • Shared interests are best realized through working to improve the competitiveness of local firms rather than through mandatory requirements (‘local content rules’). • Local a short term increase lead to content rules may in local firm participation and employment. • However... 6
  • 7. Local content rules While some isolated successes, many potential downsides, such as: • Increased investment costs and risks • Uncompetitive local industries • Reduced foreign direct investment • Higher prices for consumers • Reduced long-term employment • Exacerbation of corruption 7
  • 8. WBCSD Framework – 1 • Framework for dialogue between to investing companies and governments enhance local firm competitiveness. • Based on identification of the shared interests of companies and governments to facilitate a constructive dialogue on appropriate policy and corporate responses, and, in some cases, coordinated or collaborative actions. • Provides a tool for engaging with government, using evidence-based insights and proven strategies to foster competitiveness. 8
  • 9. WBCSD Framework – 2 • Offers a stepwise process and a to of options for investing companies menu pursue this dialogue. • Does not make specific prescriptions for managing the relationship with government. • Applicable for a broad range of sectors, geographies and scales of investment. • Target audience: country/operational management, public affairs, supplier development functions 9
  • 10. Key features of the WBCSD Framework • Analysis interests of interests and objectives – Starting point: identification of of shared the shared companies and governments • Drivers of competitiveness – Simple modelplatformkey microeconomic and of the macroeconomic drivers of competitiveness as for a more focused dialogue on priority areas for improvement. • Menugovernments and other stakeholders to support realization of shared of potential actions – Identification of appropriate actions by companies and by objectives. • Metrics – Measurement model to help evaluate progressperformance of local and to guide effective management of actions. Also: set of metrics to assess the firms & impacts on local economic development and the business of investing companies. • Case studies –capacity development. Demonstrate the contribution of WBCSD member companies to sustainable local 10
  • 11. Supporting improvements in local firm competitiveness: A virtuous circle
  • 13. Metrics INPUTS TO OUTPUTS IN ENHANCED ENHANCED OUTCOMES COMPETITIVENESS COMPETITIVENESS COST MICROECONOMIC DRIVERS SCHEDULING LOCAL ECONOMIC RELIABILITY DEVELOPMENT QUALITY IMPACT ON ASSURANCE INVESTING COMPANIES MACROECONOMIC CONTRACT DRIVERS AWARD
  • 14. Development benefits • Sustainable economic development • Long-term employment creation • Higher productivity and living standards • Technology cooperation & increased absorptive capacity • Positive spillovers from key interventions  Educationinfrastructure & training  Improved enabling environment  Business 14
  • 15. Challenges Employment outcomes: • Short-term: higher, morereductions employment no effect or • Long term: sustainable growth in the sector and beyond Mismatch with investment cycle: • Manyand services (e.g. during upfront demand for goods investments have large construction) • Insufficient time for building capacity to participate • Potential solutions: early analysis, operational phase procurement strategies, linking with appropriate 15
  • 16. Why use the Framework as basis for dialogue? • Maximization of investor contributions – Impact of many investor-led programs to improve local firm capabilities and competitiveness is often determined by the enabling policy environment • Collaborative action – Training and skills development partnerships, cluster formation, etc. require a level of formal collaboration • Developing better policies – Effective and information policies and programs often need insight government which only the private sector holds (e.g. employment and training needs) 16
  • 17. 3 objectives of the WBCSD Framework • Move the discussion of national market participation past negotiations over restrictive requirements and towards a search for strategies and actions that achieve long-term benefits for both sides. • Transform what can be an to one that is relationship with government adversarial cooperative and can draw in other partners from the public, private and nongovernmental sectors. • Broaden the national market participation discussion to include spillover benefits to firms that may be outside the investing companies’ supply chains. 17
  • 18. Download this WBCSD tool at http://www.wbcsd.org/work-program/development.aspx Matthew Lynch lynch@wbcsd.org +41 22 839 31 94