Economic Development of the Maghreb: The Role of Technology and Innovative SMEs

Pier A. Abetti, Ph D
Lally School of Management and Technology Rensselaer Polytechnic Institute Troy, New York, USA

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Outline
1. Business competitiveness and growth competitiveness of countries 2. World country rankings 2004 3. Maghreb – country rankings 2004 4. Maghreb – situation analysis 5. A roadmap for growth: the role of technology 6. Examples of countries that achieved high growth through technology 7. Technology utilization, transfer and innovation 8. The role of innovative SMEs for economic development and job creation 9. Conclusion: the challenge and a roadmap for the Maghreb
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Business Competitiveness of Countries
• Source World economic forum (Geneva) and Harvard Business School (Prof. Michael Porter) Definition Ability of firms in a country to create valuable goods and services using efficient methods

High wages, exports, and attractive returns to capital

• •

Improved quality of life and sustained investment Objective Rankings of 117 countries
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World Growth Competitiveness of Countries
• Source World economic forum (Geneva) and Harvard Business School (Prof. Michael Porter) Definition The set of country institutions and economic policies supportive of high rates of economic growth in the medium term Objective Best estimate of prospects for growth over the coming five years of 117 economies

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World Growth Competitiveness – 2
• Methodology Combination of hard data and executive opinion survey of 4600 business leaders These leaders compare aspects of local business environment with global standards and make investments and policy decisions that drive economic growth and development

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Growth Competitiveness Ranking Criteria
1. Technology 2. Public institutions 3. Macroeconomic environment

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Country Competitiveness Rankings 2005 – 1
Country
United States

Business Comp. Rank
1 2 3 4 5 6 7 8 11

Growth Comp. Rank
2 1 15 4 6 13 8 12 30

Δ
-1 +1 -12 0 -1 -7 -1 -4 -19

*

Finland Germany Denmark Singapore United Kingdom Switzerland Japan France

* Countries to watch

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Country Competitiveness Rankings 2005 – 2
Country Business Comp. Rank
14 17 26 28 29 31 35 51 57 71 79 95

Growth Comp. Rank
5 26 20 42 23 50 40 66 49 53 76 78

Δ
+9 -9 +6 -14 +6 -19 -5 -15 +8 +18 +3 +17
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* * *

Taiwan Ireland Estonia South Africa Chile India Tunisia Turkey China Egypt Morocco Algeria

* Countries to watch

Implications for the Maghreb
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Maghreb – Summary of Rankings 2005
Tunisia Algeria
Business competitiveness
– Company operations – Business Environment

Morocco
79 80 88 76

35 46 34 40 34 40 60

95 111 75 78 44 81 114

Growth competitiveness
– Macroeconomic environment – Public institutions – Technology

67 85 78

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Tunisia – Situation Analysis
1. Tunisia is the leader among North African countries and second among African countries (after South Africa) 2. Tunisia’s leadership is caused by good macroeconomic and business environments with solid public institutions 3. However, Tunisia is falling behind in growth competitiveness due to inefficient company operations 4. In turn, these operations and economic growth are affected by the below average technology ranking

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Algeria – Situation Analysis
1. Algeria is an emerging country, fourth in North Africa 2. Algeria’s average position is caused by poor business environment, public institutions and inefficient company operations 3. Algeria is moving ahead rapidly in growth competitiveness thanks to good macroeconomic environment 4. However, the very low technology ranking negatively affects company operations and economic growth

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Morocco – Situation Analysis
1. Morocco is third among North African countries 2. Morocco’s position is caused by below average public institutions, business and macroeconomic environment 3. Morocco’s slowly improving growth competitiveness is hampered by inefficient company operations 4. In turn, these operations and economic growth are seriously affected by the low technology ranking

Technology is the major challenge for the Maghreb
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A Roadmap for Growth of the Maghreb
1. World competitiveness is driven by five factors that can be visualized as five drivers of economic growth

2. Each country should strengthen the strongest horse to maintain momentum Tunisia – Business environment Algeria – Macroeconomic environment Morocco – Macroeconomic environment
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A Roadmap for Growth of the Maghreb – 2
3. World competitiveness can also be visualized as a chain of five links. The strength of the chain is determined by the weakest link

4. Technology is the weakest link for the Maghreb 5. Technology is the key for improving operations, developing exports and creating high-value-added employment

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How can the Maghreb improve its technology position?

By following the example of young, entrepreneurial countries that have achieved high economic growth

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Examples of High Growth Through Technology
Size GDP Indep. Population GDP/PP* GDP/PP* Techn. Country (1000 Growth (date) (millions) ($billions) Capita ($) Rank km2) %/year Finland Taiwan Estonia Ireland Tunisia Morocco Algeria 1922 (1946) 1946 1991 1937 1956 1956 1962 337 36 45 70 163 446 2382 5.2 22.5 1.4 3.9 10.0 32.0 32.0 151 576 19 126 71 134 212 29,000 25,300 14,300 31,900 7,100 4,200 6,600 3.0 6.0 6.0 5.1 5.1 4.4 6.1 2 3 18 31 60 78 114

* PP = Purchasing Parity Source: U.S. Government (2004 estimate)
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Three Modalities for Technology Utilization
Technology can be embodied in • Products (cellular phones – Nokia in Finland) • Processes (mosquito repellents – Zobele in Italy, Malaysia) • Services (software – Microsoft in USA, Ireland, India)

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Technology Transfer
1. Technology required by the Maghreb countries is available at no cost, or with moderate fees from USA, CEE, and Japan 2. However, technology must be selectively sought and transferred proactively and continuously 3. Two extreme cases: • Mexico and Taiwan had equal access to U.S. technology since 1950 • Taiwan is now ranked 3, Mexico 57
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Abetti’s Laws for Technology Transfer
1. Technology is transferred by people, not paper 2. Market pull transfers more technology than technology push 3. Embodied technology is worth much more than disembodied technology 4. Initially technology transfer rate (D = 1 _ ~D distance), later almost independent of – distance

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Technological Innovation
1. Once technology has been successfully transferred it must be adapted and improved through technological innovation 2. Successful innovation implies the profitable utilization of the new technology for new applications and markets 3. Sources of innovation: • Universities • Large companies • Government labs • High-value-added SMEs 4. High-value-added SMEs will be the major contributors to growth, employment and world competitiveness in the Maghreb
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Examples of High Growth Through Technology
Size GDP Indep. Population GDP/PP* GDP/PP* Techn. Country (1000 Growth (date) (millions) ($billions) Capita ($) Rank km2) %/year Finland Taiwan Estonia Ireland 1922 (1946) 1946 1991 1937 337 36 45 70 5.2 22.5 1.4 3.9 151 576 19 126 29,000 25,300 14,300 31,900 3.0 6.0 6.0 5.1 2 3 18 31

SMEs are the major contributors of these economies

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Innovative SMEs – 1
Innovative SMEs represent a major national resource, because they: • Create direct high-value-added jobs • Create indirect jobs (5 to 1 factor) • Are more innovative and efficient than large enterprises (public or private) • Promote exports • Improve the quality of life

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Innovative SMEs – 2
Innovative SMEs represent a major national resource, because they: • Have higher survival rate than other new businesses • Do not rely on scarce natural resources • Are diversified in technologies and markets • Are models for developing innovation in the country • Are the major source of job creation
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U.S. Fortune 500 Share of Employment

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U.S. Job Growth, ’90-’94

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Entrepreneurship Explosion
• Fortune 500 share of employment plummeted from 19% in 1968 to 9% in 1996 • Large businesses dropped nearly 4 million jobs in 1990-94 • Firms with less than 50 employees swelled by 8 million new jobs. The smallest created the most jobs

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Conclusion – The Challenge for the Maghreb
Creation of high-value-added jobs for the new well-educated booming generations

Prevent unemployment, emigration, social unrest Healthy, sustainable economic growth
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Conclusion – A Roadmap for the Maghreb
Economic growth High-value-added employment, exports, world trade balance Innovative SMEs Technology and management skills, enlightened government policies We are here to work with you!
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