The Competitive Advantage of Nations and Regions: Implications for the Caribbean

The Competitive Advantage of Nations and Regions: Implications for the Caribbean Professor Michael E. Porter Harvard Business School Distinguished Leadership and Innovation Conference Trinidad and Tobago March 25, 2011 This presentation draws on ideas from Professor Porter s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), Building the Microeconomic Foundations of Competitiveness, in The Global Competitiveness Report (World Economic Forum), Clusters and the New Competitive Agenda for Companies and Governments in On Competition (Harvard Business School Press, 2008), and ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter. Further information on Professor Porter s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu 1 Copyright 2011 Professor Michael E. Porter

The Caribbean Region in 2011 The Caribbean nations are recovering from a sharp global crisis However, the region is not progressing rapidly enough in driving economic and prosperity growth Caribbean countries need strategies to improve competitiveness and drive fundamental economic reform 2 Copyright 2011 Professor Michael E. Porter

PPP-adjusted GDP per Capita, 2010 ($USD) $30,000 Differences in Prosperity Performance Caribbean Countries Unweighted Average: 4.45% Aruba ($138,146) Barbados ($64,730) $25,000 $20,000 Bahamas Mexico Panama Suriname Argentina $15,000 St Kitts & Nevis Chile Uruguay Antigua & Barbuda Trinidad and Tobago Venezuela Brazil Grenada Dominican Republic Unweighted Average: $10,290 $10,000 Costa Rica St Vincents & the Grenadines Cuba Colombia Peru Belize Ecuador St Lucia Dominica Guatemala Paraguay Guyana $5,000 Jamaica Bolivia Honduras Nicaragua Caribbean countries Haiti Other Latin American countries $0 0% 2% 4% 6% 8% 10% 12% Growth of Real GDP per Capita (PPP-adjusted), CAGR, 2000-2010 Note: Aruba not included in average Source: EIU (2011), authors calculations 3 Copyright 2011 Professor Michael E. Porter

Index of Inequality (2006)* 60 High Inequality 55 50 45 40 Income Inequality Selected Countries Honduras Nicaragua Dominican Republic Venezuela United States Colombia Brazil Chile Panama Ecuador Mexico Puerto Rico Bolivia Costa Rica Guatemala El Salvador Peru Argentina Uruguay Jamaica The Bahamas 35 30 Low Inequality Trinidad and Tobago Caribbean countries Other American countries 25 Decreasing Equality Improving Equality 20-15 -10-5 0 5 10 15 Change in Inequality (2002-2006) Note: * latest data available used (in some cases earlier years data used). Source: World Bank, World Development Indicators, 2008, United Nations University (UNU-WIDER) 4 Copyright 2011 Professor Michael E. Porter

Sources of Prosperity Inherited Prosperity Created Prosperity Prosperity derived from inherited natural resources Prosperity is limited Prosperity resulting from productivity in producing goods and services Prosperity is unlimited Focus on dividing the pie Government becomes the central actor in the economy Resource revenues fuel corruption and allow unproductive policies and practices to persist Expands the pie Companies are the central actors in the economy Government s role is to create the enabling conditions for productivity and foster private sector development 5 Copyright 2011 Professor Michael E. Porter

What is Competitiveness? Competitiveness is the productivity with which a nation uses its human, capital, and natural resources. Productivity sets the sustainable standard of living (wages, returns on capital, returns on natural resources) It is not what industries a nation competes in that matters for prosperity, but how productively it competes in those industries Productivity in a national economy arises from a combination of domestic and foreign firms Only competitive businesses can create wealth and jobs Nations compete to offer the most productive environment for business The public and private sectors play different but interrelated roles in creating a productive economy 6 Copyright 2011 Professor Michael E. Porter

Real GDP per employee (PPP adjusted US$), 2010 Labor Productivity Performance Selected Latin American Countries, 2000-2010 $50,000 Latin America average: 1.17% Trinidad & Tobago $40,000 $30,000 Uruguay Chile Argentina Venezuela $20,000 Barbados Latin America average: $19,676 Mexico Colombia Guatemala Costa Rica Brazil Ecuador Peru Dominican Republic $10,000 St. Lucia Jamaica Bolivia Caribbean countries Other Latin American countries $0-2% -1% 0% 1% 2% 3% 4% 5% Growth of real GDP per employee (PPP-adjusted), 2000 to 2010 Note: Trinidad &Tobago data is heavily biased due to natural gas exports and may overstate productivity Source: authors calculation Groningen Growth and Development Centre (2011), EIU (2011) 7 Copyright 2011 Professor Michael E. Porter

Labor Participation Rate 70% Labor Participation Rate Selected Countries 60% 50% 40% 30% 20% 10% 0% China Canada Brazil Russia Japan United States Uruguay Jamaica Dominican Republic El Salvador Paraguay Trinidad and Tobago Costa Rica Bolivia Cuba Venezuela Honduras Colombia Chile Mexico Panama Argentina India Nicaragua Peru Ecuador Guatemala Source: EIU (2011) 8 Copyright 2011 Professor Michael E. Porter

What Determines Competitiveness? Endowments Endowments create a foundation for prosperity, but true prosperity is created by productivity in the use of endowments 9 Copyright 2011 Professor Michael E. Porter

What Determines Competitiveness? Macroeconomic Competitiveness Macroeconomic Policies Social Macroeconomic Infrastructure and Policies Political Institutions Endowments Macroeconomic competitiveness sets the potential for high productivity, but is not sufficient Endowments create a foundation for prosperity, but true prosperity is created by productivity in the use of endowments 10 Copyright 2011 Professor Michael E. Porter

What Determines Competitiveness? Microeconomic Competitiveness Quality of the National Business Environment State of Cluster Development Sophistication of Company Operations and Strategy Macroeconomic Competitiveness Macroeconomic Policies Social Macroeconomic Infrastructure and Policies Political Institutions Endowments Productivity ultimately depends on improving the microeconomic capability of the economy and the sophistication of local competition Macroeconomic competitiveness sets the potential for high productivity, but is not sufficient Endowments create a foundation for prosperity, but true prosperity is created by productivity in the use of endowments 11 Copyright 2011 Professor Michael E. Porter

Macroeconomic Competitiveness Macroeconomic Policies Social Infrastructure and Political Institutions Fiscal policy Government surplus/deficit Government debt Monetary policy Inflation Business cycle management Savings Human development Basic education Health Political institutions Political freedom Voice and accountability Political stability Government effectiveness Decentralization of economic policymaking Rule of law Security Civil rights Judicial independence Efficiency of legal framework Freedom from corruption 12 Copyright 2011 Professor Michael E. Porter

Macroeconomic Competitiveness: Human Development Country GDP per capita rank Human Development Rank Life expectancy index Education index Barbados 3 37 62 Bahamas 42 64 55 Panama 47 50 60 Suriname 53 108 106 Trinidad and Tobago 58 106 83 Dominican Republic 69 83 108 Costa Rica 72 30 95 Belize 82 42 74 Guatemala 85 104 133 El Salvador 89 97 100 Guyana 91 117 85 Jamaica 99 87 77 Honduras 106 84 111 Source: World Bank, Human Development Index 2011 13 Copyright 2011 Professor Michael E. Porter

Macroeconomic Competitiveness: Governance Best country in the world Index of Governance Quality, 2009 Voice and Accountability Political Stability Government Effectiveness Regulatory Quality Rule of Law Control of Corruption Worst country in the world Aruba Barbados St. Kitts And Nevis St. Vincent And The Grenadines Antigua And Barbuda Dominica Costa Rica Trinidad And Tobago Jamaica El Salvador Suriname Dominican Republic Honduras Guatemala Haiti Note: Sorted left to right by decreasing average value across all indicators. The zero horizontal line corresponds to the median country s average value across all indicators. Source: World Bank (2011) 14 Copyright 2011 Professor Michael E. Porter

Rank in Global Corruption Index, 2009 Low corruption Macroeconomic Competitiveness: Corruption Canada USA Chile Uruguay Costa Rica Cuba Trinidad and Tobago Brazil El Salvador Mexico Jamaica Dominican Republic Colombia, Peru Panama Argentina Guatemala Venezuela High corruption Worsening Nicaragua Bolivia Honduras Ecuador Paraguay Haiti Improving Caribbean countries Other American countries Change in Rank, Global Corruption Report, 2003 to 2009 Source:Global Corruption Report, 2010 15 Copyright 2011 Professor Michael E. Porter

Competitiveness and Poverty Reduction Social Development Economic Development There is a strong connection between economic and social development Improving competitiveness and decreasing poverty requires improving the economic and social context simultaneously 16 Copyright 2011 Professor Michael E. Porter

What Determines Competitiveness? The external business environment conditions that enable company productivity and innovation Quality of the National Business Environment Microeconomic Competitiveness State of Cluster Development Sophistication of Company Operations and Strategy Macroeconomic Competitiveness Macroeconomic Policies Social Infrastructure and Political Institutions Endowments 17 Copyright 2011 Professor Michael E. Porter

Quality of the National Business Environment Context for Firm Strategy and Rivalry Factor (Input) Conditions Access to high quality business inputs Human resources Capital availability Physical infrastructure Administrative infrastructure (e.g., permitting, land registration) Scientific and technological infrastructure Efficient access to natural endowments Local rules and incentives that encourage investment and productivity e.g. incentives for capital investments, intellectual property protection, corporate governance standards Open and vigorous local competition Openness to foreign competition Fair competition laws Related and Supporting Industries Availability of suppliers and supporting industries Demand Conditions Sophisticated and demanding local customers and needs e.g., Strict quality, safety, and environmental standards Consumer protection laws Many things matter for competitiveness Successful economic development is a process of successive upgrading, in which the business environment improves to enable increasingly sophisticated ways of competing 18 Copyright 2011 Professor Michael E. Porter

Microeconomic Competitiveness: Ease of Doing Business Trinidad and Tobago, 2011 Ranking, 2011 (vs. 183 countries) 180 160 140 120 100 Favorable Unfavorable Trinidad and Tobago s per capita GDP rank: 63 80 60 40 20 0 Doing Business Protecting Investors Source: World Bank Report, Doing Business (2011). Getting Credit Trading Across Borders Starting a Business Dealing with Construction Permits Paying Taxes Enforcing Contracts Registering Property Closing a Business 19 Copyright 2011 Professor Michael E. Porter

Microeconomic Competitiveness: Ease of Doing Business Suriname, 2011 Ranking, 2011 (vs. 183 countries) 180 Favorable Unfavorable 160 140 120 100 Suriname s per capita GDP rank: 57 80 60 40 20 0 Ease of Doing Business Rank Paying Taxes Dealing with Construction Permits Trading Across Borders Getting Credit Closing a Business Registering Property Starting a Business Enforcing Contracts Protecting Investors Source: World Bank Report, Doing Business (2011). 20 Copyright 2011 Professor Michael E. Porter

Microeconomic Competitiveness: Ease of Doing Business Caribbean Nations, 2011 Ranking, 2011 (vs. 183 countries) 180 Favorable Unfavorable 160 140 120 100 80 60 40 20 Puerto Rico St Lucia Antigua & Barbuda St Vincents & the Grenadines Bahamas Jamaica El Salvador St Kitts & Nevis Dominica Dominican Republic Grenada Trinidad and Tobago Belize Guyana Suriname 0 Haiti Source: World Bank Report, Doing Business (2011). 21 Copyright 2011 Professor Michael E. Porter

Low skills The Business Environment in the Caribbean Selected Issues Brain drain Bureaucracy and red tape Weak property and contractual rights Barriers to domestic and international competition, despite significant progress in removing barriers within the region High communication costs Limited sophistication of company strategies Low innovative capacity 22 Copyright 2011 Professor Michael E. Porter

What Determines Competitiveness? Microeconomic Competitiveness A critical mass of firms and institutions in each field to harness efficiencies and externalities across related entities Quality of the National Business Environment State of Cluster Development Sophistication of Company Operations and Strategy Macroeconomic Competitiveness Social Macroeconomic Infrastructure and Policies Political Institutions Social Macroeconomic Infrastructure and Policies Political Institutions Endowments 23 Copyright 2011 Professor Michael E. Porter

State of Cluster Development Tourism Cluster in Cairns, Australia Public Relations & Market Research Services Travel agents Tour operators Local retail, health care, and other services Food Suppliers Property Services Restaurants Attractions and Activities e.g., theme parks, casinos, sports Local Transportation Souvenirs, Duty Free Maintenance Services Hotels Airlines, Cruise Ships Banks, Foreign Exchange Government agencies e.g. Australian Tourism Commission, Great Barrier Reef Authority Educational Institutions e.g. James Cook University, Cairns College of TAFE Industry Groups e.g. Queensland Tourism Industry Council Sources: HBS student team research (2003) - Peter Tynan, Chai McConnell, Alexandra West, Jean Hayden 24 Copyright 2011 Professor Michael E. Porter

Kenya s Cut Flower Cluster Government Agencies, NGOs & Industry Associations Horticultural Crops Development Authority (HCDA) Government Export Policies targeting Horticulture Government Policy for Revitalizing Agriculture; National Export Strategy; Export Promotion Council (EPC) Plantstock Greenhouse; Shading Structures Non-Governmental Organizations The Rural Enterprise Agri-Business Promotion Project (USAID, CARE, IFAD) Horticultural Produce Handling Facilities Project (JBIC) Trade & Industry Associations Kenya Flower Council (KFC) Fresh Produce Exporters Association of Kenya (FPEAK) Regional Growers Associations e.g., North & South Kinangop; Lake Naivasha, etc Post-Harvest Cooling Technology Grading / Packaging Sheds Irrigation technology Pre-Cooling Technology Flower Farming Post-Harvest Handling; Transport to Market Packaging & Labeling Materials Refrigerated Trucks Fertilizers, pesticides, herbicides Agricultural Cluster Education, Research & Quality Standards Organizations Research Institutions: Kenya Agricultural Research Institute (KARI) International Center for Insect Physiology and Ecology (ICIPE) Freight Forwarders Clearing and Forwarding Agents Horticultural Cluster (Fruits & Vegetables) Public universities with post graduate degrees in horticulture: University of Nairobi; Jomo Kenyatta University of Agriculture & Technology Quality & Standards: EUREGAP Standard (UK & Dutch Supermarkets) Kenya Plant Health Inspectorate Services (KEPHIS) Air Carriers (Commercial / Charters) Tourism Cluster Sources: MOC student team research by Kusi Hornberger, Nick Ndiritu, Lalo Ponce-Brito, Melesse Tashu, Tijan Watt, Harvard Business School, 2007 25 Copyright 2011 Professor Michael E. Porter

Assessing Cluster Strength Dominican Republic Tourism Cluster Context for Firm Strategy and Rivalry Factor Conditions + Large, competitive but almost exclusively foreign-owned hotel industry + No visa required for residents of most major tourist nations Focus on all-inclusive offerings with limited local spending Local institutions discriminate against natives Demand Conditions + Long beaches, stable sunshine, and beautiful inland area with extensive Flora and Fauna + Many cultural and historical heritage sites + Good airport connectivity + Definpro, Infratur units of Central Bank to finance tourism projects + Special tourism police Inadequate language skills of local employees Limited local infrastructure Source: Based on research by HBS student team (Baruch Barrera, Penelopa Gjurcilova, Stacie Rabinowitz, Hiroki Suemori), 20110325 2007 Trinidad and Tobago FINAL post-event edits - prepared by RA Stacie Rabinowitz Related and Supporting Industries + High-end demand in local pockets around Punta Cana Lack of sophisticated local demand + Significant presence of local suppliers (food, cleaning, gardening, etc.) + Existence of Asonahores hotel association + Some regional cooperation (e.g., marketing for Cricket World Cup) Lack of complimentary industry like restaurants, shopping, events, etc. Most travel agencies / tour bookers located outside region Lack of coordination/strategy in Ministry of Tourism No participation in regional IFCs (e.g., CTO) 26 Copyright 2011 Professor Michael E. Porter

0.250% National Cluster Export Portfolio Jamaica, 1999-2009 Change in Jamaica s average world export share: - 0.021% Change (99-09) Jamaica s world export market share, 2009 0.200% 0.150% 0.100% 0.050% Hospitality and Tourism Communications Services (-0.421%) Transportation and Logistics Jamaica s average world export share: 0.028% Processed Food Business Services Rising Exports Declining Exports Construction Materials Chemical Products Metal Agricultural Products Biopharmaceuticals Mining & Mfg. (-0.158%) Fishing and Fishing Products Financial Services Plastics 0.000% -0.05% -0.04% -0.03% -0.02% -0.01% 0.00% 0.01% 0.02% Change in Jamaica s world export market share, 1999 2009 Oil and Gas Products Exports of US$5 Million = Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics. 27 Copyright 2011 Professor Michael E. Porter

Cluster Linkages and Economic Diversification Fishing & Fishing Products Agricultural Products Hospitality & Tourism Prefabricated Enclosures Textiles Jewelry & Precious Metals Footwear Business Services Financial Services Apparel Processed Food Leather & Related Products Distribution Services Publishing & Printing Oil & Gas Transportation & Logistics Education & Knowledge Creation Chemical Products Plastics Information Tech. Medical Devices Entertainment Analytical Instruments Tobacco Aerospace Vehicles & Defense Biopharmaceuticals Communications Equipment Lightning & Electrical Equipment Building Fixtures, Equipment & Services Power Generation Motor Driven Products Furniture Aerospace Engines Heavy Construction Services Heavy Machinery Construction Materials Forest Products Production Technology Mining & Metal Manufacturing Sporting & Recreation Goods Automotive Note: Clusters with overlapping borders or identical shading have at least 20% overlap (by number of industries) in both directions. 28 Copyright 2011 Professor Michael E. Porter

Jewelry & Precious Metals Footwear Cluster Linkages and Economic Diversification Processed Food Business Services Financial Services Apparel Leather & Related Products Fishing & Fishing Products Agricultural Products Distribution Services Publishing & Printing Oil & Gas Transportation & Logistics Education & Knowledge Creation Chemical Products Plastics Barbados, 2009 Hospitality & Tourism Information Tech. Medical Devices Analytical Instruments Tobacco Aerospace Vehicles & Defense Biopharmaceuticals Entertainment Communications Equipment Lightning & Electrical Equipment Prefabricated Enclosures LQ > 1.5 LQ > 1.0 LQ > 0.5 Building Fixtures, Equipment & Services Power Generation Motor Driven Products Furniture Aerospace Engines Heavy Construction Services Heavy Machinery LQ, or Location Quotient, measures the country s share in cluster exports relative to its overall share of world exports. 20110325 An LQ Trinidad > 1 indicates and Tobago FINAL an above post-event average edits - prepared export by RA Stacie share Rabinowitz in a cluster. Textiles Construction Materials Forest Products Production Technology Mining & Metal Automotive Manufacturing Sporting & Recreation Goods 29 Copyright 2011 Professor Michael E. Porter

The Evolution of Regional Economies San Diego Climate and Geography U.S. Military Hospitality and Tourism Transportation and Logistics Aerospace Vehicles and Defense Power Generation Analytical Instruments Communications Equipment Sporting Goods Information Technology Education and Knowledge Creation Medical Devices Bioscience Research Centers Biotech / Pharmaceuticals 1910 1930 1950 1970 1990 30 Copyright 2011 Professor Michael E. Porter

Clusters and Economic Diversification Upgrade the sophistication of existing export products and services Attract multinationals to anchor new clusters Grow new industries within existing clusters Grow related clusters 31 Copyright 2011 Professor Michael E. Porter

What Determines Competitiveness? Quality of the National Business Environment Microeconomic Competitiveness State of Cluster Development Sophistication of Company Operations and Strategy The internal skills, capabilities, and management practices needed for companies to attain the highest level of productivity and innovation possible Macroeconomic Competitiveness Social Macroeconomic Infrastructure and Policies Political Institutions Social Macroeconomic Infrastructure and Policies Political Institutions Endowments Vietnam Competitiveness 20101130 v8 Mon Nov 22 10AM 32 Copyright 2010 @ Professor Michael E. Porter

Leading Companies with Cross-Regional Presence Company Home Base Other Industry/Industries Regional Locations Ansa McAl Trinidad & Tobago 7 Conglomerate (manufacturing, brewing, insurance, finance, real estate, media, shipping, trading/ distribution, automotive and industrial equipment retailing) Banks Holdings Barbados 3 Beverages Caribbean Broilers Jamaica 4 Poultry, feed milling, cattle rearing, beef production and fish farming with value-added processed food products Cave Shepherd Barbados 9 Retail (duty free), financial services, tourism (attractions, cruise terminal) Goddard Enterprise Barbados 8 Airline catering, industrial and restaurant catering, meat processing, bakery operations, automobile retail and automotive parts, real estate, the manufacture of aerosols and liquid detergents, investments, rum distilling, general trading, packaging, fish and shrimp processing, property rentals, general insurance, financing as well as shipping agents and stevedoring Grace Kennedy and Co. Jamaica 7 Food processing/distribution, banking and finance, insurance and Ltd. remittance services, building materials retailing Harris Paints Barbados 4 Paints, coatings, adhesives, sealants, roof sealers, caulks and solvents GTM Guyana 3 Insurance Guardian Holdings Trinidad & Tobago 7 Life, health, property and casualty insurance; pensions and asset management Neal and Massy Trinidad & Tobago 7 Auto and industrial equipment; energy and industrial gases; financial and real estate; food processing, distribution, and retailing; tourism and hospitality; IT, communications, and security Republic Bank Trinidad & Tobago 4 Banking S.M. Jaleel Trinidad & Tobago 5 Beverages Sagicor Barbados 11 Insurance, banking and investment management, farm capital TCL Trinidad & Tobago 5 Cement and other ready-mix building materials United Insurance Barbados 10 Insurance Source: CARICOM 33 Copyright 2011 Professor Michael E. Porter

Geographic Influences on Competitiveness Neighboring Countries Nation Regions and Cities 34 Copyright 2011 Professor Michael E. Porter

Competitiveness and the Neighborhood Opening trade and investment among neighbors Expands the available market A nation s neighbors are its most natural trading and investment partners The natural path of internationalization for local firms is the neighborhood Open trade and investment make each country a more attractive location for investment Economic coordination to drive improvements in the business environment Capture synergies in policy and infrastructure Gain greater clout in international negotiations External agreements to help overcome domestic political and economic barriers to reform 35 Copyright 2011 Professor Michael E. Porter

Competitiveness Upgrading Among Neighbors Capturing Synergies Business Environment Macroeconomic Policy Political Institutions and Governance Factor Conditions Improving the efficiency and interconnectivity of transportation infrastructure Enhancing regional communications Creating an efficient energy network Linking financial markets Opening the movement of students for training or higher education Context for Strategy and Rivalry Eliminating trade and investment barriers within the region Simplifying and harmonizing cross-border regulations, paperwork and visas Coordinating antitrust and competition policies Demand Conditions Harmonizing environmental and energy standards Harmonizing product safety standards Establishing reciprocal consumer protection laws Opening government procurement within the region Related and Supporting Industries Facilitating cross-border cluster upgrading Coordinating macroeconomic policies Coordinated financial market rules Strong regional development bank Sharing best practices in government operations Creating regional institutions e.g., disaster relief Dispute resolution mechanisms Economic statistics Developing a regional approach with international organizations 36 Copyright 2011 Professor Michael E. Porter

Strategy for Cross-National Regions Central American Logistical Corridor Mexico Belize Guatemala Honduras El Salvador Nicaragua Roads Ports Airports Logistic Corridor Country Boundary Costa Rica Panama 37 Copyright 2011 Professor Michael E. Porter

The Context for Regional Collaboration in the Caribbean Similarities in natural conditions and historical legacies Significant heterogeneity in economic performance Direct competition within the region in, for example, tourism and finance An overlapping system of regional organizations and groupings Some encouraging progress has been made in regional collaboration in the last few years Overall, the Caribbean still lacks effective mechanisms for sustaining an integrated competitiveness agenda that will benefit participating countries 38 Copyright 2011 Professor Michael E. Porter

The Process of Economic Development Shifting Roles and Responsibilities Old Model New Model The central government drives economic development through policy decisions, spending and incentives Economic development is a collaborative process involving government at multiple levels, companies, educational and research institutions, and private sector organizations Competitiveness is the result of both top-down and bottom-up processes in which many individuals, companies, and institutions take relevant decisions 39 Copyright 2011 Professor Michael E. Porter

The Need for an Economic Strategy Policy Improvement Economic Strategy Implementing best practices in each policy area A prioritized agenda to create a unique competitive position for a country or region There are a huge number of policy areas that matter No country can or should try to make progress in all areas simultaneously 40 Copyright 2011 Professor Michael E. Porter

Creating A National Economic Strategy National Value Proposition The distinctive competitive position of the nation in its region and the world economy Developing Unique Strengths Addressing Crucial Constraints Unique strengths relative to peers/neighbors Strong existing and emerging clusters to build upon Weaknesses or constraints that must be addressed if the country is to move to the next level Priorities and sequencing are fundamental to successful economic development 41 Copyright 2011 Professor Michael E. Porter