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BRIEF

Competitiveness Overview

September 30, 2014



Context:

  • By 2027, 600 million jobs must be created in developing countries—mainly in Africa and Asia—to accommodate people entering the workforce. Such a rapid growth of the working-age population requires an almost unprecedented pace of job creation.
  • Social services improvements, macroeconomic reforms and broad investment climate changes while necessary, do not by themselves lead to increased investment and employment. Market and governance failures—infrastructure bottlenecks, lack of access to finance and technology, administrative barriers to entry, and skills gaps— hamper country growth and development prospects.
  • Focusing on specific industrial sectors, chosen for their competitive potential, is a more targeted way to spur the creation of sustainable, higher-value-added jobs. The Competitive Industries (CI) approach works to address the obstacles and drivers of competitiveness at the industry and spatial level.
  • Through the CI approach the World Bank Group provides operational support; develops knowledge to improve the chances of success, and builds a community of practitioners to help client countries develop industry level solutions that remove constraints to growth and transform their development prospects.


Strategy:

Creating High-Value Jobs By Focusing Investment at the Industry Level

The CI approach helps client countries identify and address economic barriers that impede the growth of local industries and implement strategies that have the potential to produce strong job growth. These efforts focus on specific industries and on the development of value chains and clusters through private sector participation. They involve deep value chain diagnostics, inclusive dialogue between the public and private sectors, the targeting of regulatory reforms, the strategic prioritization of public investments, the leveraging and promotion of private investments, and benchmarking and accountability. 

The World Bank Group is using the CI approach in about 324 initiatives worldwide, including 208 advisory projects, as well as 13 lending operations that are worth more than $1.3 billion, with a further 28 projects in preparation worth an additional $1.2 billion. The value of the active combined technical assistance portfolio is about US$37 million, with the highest concentration in spending on agribusiness, manufacturing, and tourism.


Results:

New Firms and Clusters, Increased Productivity, Improved Competition, Industrial Upgrading, Innovation, and Job Creation

The World Bank Group achieves results by financing strategic investments in specific industrial sectors and by working with governments to overcome economic and structural barriers to industry growth, such as import-export barriers.

It applies a customized approach in each engagement, considering the context of the client country, the key issues in the local economic environment, and the available resources. These engagements:

  • Empower and crowd-in the private sector, which accounts for 90 percent of all global employment
  • Focus on maximizing growth and inclusion throughout value chains and, in particular, in those that have the potential for transformational change, and
  • Leverage technological change and knowledge transfer to accelerate returns from improvements in economic management, investment climate, infrastructure and social services.

CI initiatives support entire industries, value chains, or clusters, rather than individual firms. They place a particular emphasis on gains from improved interconnectedness of value chains. They also emphasize open processes, monitoring of fiscal costs, and vigilance about the risks of “regulatory capture.”

The tools and policy interventions offered by the World Bank Group’s CI approach focus on three broad themes:

  • Sector policy and growth – delivering multi-sector analytics and diagnostics, policy reform, and implementation support with a specific focus on agribusiness, manufacturing, tourism and services sectors
  • Competitive Cities – providing research and advisory support in analyzing city competitiveness to allow for the effective growth and creation of jobs in cities
  • Spatial growth strategies – undertaking the design and implementation of approaches to attract private sector investment via special economic zones, growth poles, growth corridors, clusters, and anchor investments (e.g., in extractive industries, agribusiness, manufacturing)

The CI offering combines advisory support for projects concentrating on specific sectors with World Bank lending and technical assistance focused on mechanisms for industry growth (clusters, growth poles, zones, and other instruments). These efforts are complemented by the targeted use of resources from donor-funded programs, such as the recently established Competitive Industries and Innovation Program (CIIP) and the long-standing Facility for Investment Climate Advisory Services (FIAS).

Representative Engagements

In Afghanistan, an engagement is helping the government leverage mining investments into a resource corridor – in a conflict-afflicted environment where accelerated job creation will be vital to post war stabilization and security.

Advice and technical assistance has helped Bangladesh become the first low-income country to adopt a roadmap for reducing carbon emissions from export processing zones. Short-term steps have already generated savings of $844,000 and have reduced carbon emissions by 9,000 metric tons.

In Brazil, an advisory project has generated $1.3 billion in new investment in light and heavy manufacturing, renewable energy, agribusiness and services, creating more than 7,000 jobs.  The majority of investment and most of the resulting job creation have occurred in the frontier states of Para and Pernambuco.

In Ethiopia, a project is supporting the county’s ambitious structural transformation agenda by strengthening institutional and regulatory framework for industrial zone development, with a particular focus on enhancing linkages to small and medium enterprises.

In Macedonia, an engagement is underway to strengthen competitiveness by removing structural bottlenecks in export-oriented sectors. This will create more conducive conditions for developing high-value-added manufacturing, unlocking the potential of agribusiness and upgrading trade logistic services.

In Madagascar, a multi-faceted lending and technical assistance effort in support of growth poles in tourism and light-manufacturing sectors, includes the implementation of targeted and integrated interventions aimed at overcoming barriers to private investment in the country’s poorest regions, already creating 4,000 jobs.

In Rwanda, an advisory project is helping the government remove critical constraints to increased investment in the country’s horticulture and tea sectors. Reform of a pricing mechanism for Greenleaf tea resulted in higher prices for farmers’ crops in 2013, improving livelihoods and productivity.  The new pricing mechanism is expected to increase the earnings of over 60,000 farmers. Reforms will strengthen sustainability as the government embarks on an expansion plan to double tea exports from Rwanda by 2020. 

Media contact: Karolina Ordon Mazurkiewicz, kordon@worldbankgroup.org

Last updated: September 2014