tepav The Economic Policy Research Foundation of Turkey

A Toolkit for informing regional competitiveness agendas Esen Çağlar İstanbul, 28 January 2014

A ToolKit for Regional Competitiveness Agendas

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Outline  What was the challenge?  Background on Turkey’s regional disparities  Overview of the TEPAV-UNDP Toolkit for

Informing Regional Competitiveness Agendas  A toolkit to help regional actors (development agencies,

chambers, municipalities etc.)  Analyzing competitiveness, understanding how a region differs from others, in terms of capabilities and bottlenecks (binding constraints)  Coming up with unique growth stories and competitiveness agendas

A ToolKit for Regional Competitiveness Agendas

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Agglomeration is a fact. High level of development disparities is a problem.

Share in population

Share in manufacturing employment

Share in exports

Share of EU in regions exports

Kaynak: TÜİK, SGK, TEPAV hesaplamaları

Share of manufacturing in region’s employment

Share of MENA in regions exports

A ToolKit for Regional Competitiveness Agendas

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Western Turkey trades mostly with EU, while inland and East trade with MENA İstanbul

Other; 12%

USD 51 billion

Asia; 4%

Asia Other 11% 17%

Kocaeli

USD 10 billion

MENA; 12%

Europe; 51%

Asia; 27%

Bursa

USD 11.2 billion

Europe; 78%

İzmir

USD 6.6 billion

MENA; 10%

Kayseri

Konya

USD 1.1 billion

USD 1 billion other 13%

Gaziantep USD 3.6 billion

Asia 8%

MENA 18%

Other 16%

Asia 7%

Europe 33%

Europe 61%

Europ e 39%

MENA 33%

MENA 44%

Other; 8%

Asia; 8%

Europe; 24%

MENA; 60% Source: TURKSTAT

A ToolKit for Regional Competitiveness Agendas

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Turkey’s connectivity problem

(+ prioritization problem: carrying passengers vs. carrying containers) Six-lane Expressways (red lines, as of 2010) and the change in the number of firms located in the provinces that had more than 5 firms in the largest 1000 industrial enterprise rating of the Istanbul Chamber of Industry by 2009, between 1997 and 2009. İstanbul - 105

Tekirdağ +6

Bursa Balıkesir + 28 +2 İzmir - 37

Kocaeli Sakarya + 40 +4

Samsun +8

Ordu +1

Trabzon +3

Bolu +2 Eskişehir Ankara +1 + 18

Manisa +7

Kayseri + 10

Konya + 12

K.Maraş + 11 Adana +7

Denizli 0 Antalya +2

Karaman -1

Mersin -3

Hatay +8

Gaziantep + 15

A ToolKit for Regional Competitiveness Agendas

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Policy Background  Development Agencies established in 2006  In 26 nuts II regions  A critical public administration innovation for

Turkey, a heavily centralized country  Capacity development at the local level: young, well educated staff dedicated to finding solutions to local problems  Regional Development Plans  First round: 2011-2013  Second round: 2014-2023

A ToolKit for Regional Competitiveness Agendas

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A ToolKit for Regional Competitiveness Agendas

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What is the purpose of the toolkit?  Going beyond generic strategies («innovation», «high

competitiveness», «value added») and presentation of basic statistical information  Creating unique growth stories and competitiveness agendas  Addressing the need for different types of analyses, which originate from regional differences and variations  Improving the depth and quality of sectoral / thematic knowledge  2014-2023 regional plans  Regional thematic programs (new, to be devised)

A ToolKit for Regional Competitiveness Agendas

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Nine pillars of the competitiveness toolkit Investment Climate

3

6

2

1

External economic environment analysis

Export performance Analysis

5

4

Quality of life analysis

Value chain analysis

7

Labor skills analysis

Connectivity analysis

8

Entrepreneur -ship ecosystem analysis

Synthesis, prioritization, producing a unique ‘competiveness story’

9

Innovation Ecosystem Analysis

A ToolKit for Regional Competitiveness Agendas

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1. Investment Climate Assessment Purpose: 1. Identify conditions affecting private sector investment and firm growth 2. Analyze how current policies affect firm performance 3. Identify binding constraints / priority areas to increase competitiveness of the private sector

Methodology: Survey study, analysis of survey results , econometric analyses benchmarking

Possible outputs: 1. Analysis of factors affecting firm performance 2. Priority problems of investment climate (factors influencing competitiveness agenda)

A ToolKit for Regional Competitiveness Agendas

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Main steps for assessing the investment climate Step 1

Preparation of investment climate survey and its application

Step 2

Step 3

Analysis of survey results (descriptive, causality)

Determining policy priorities

A ToolKit for Regional Competitiveness Agendas

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Sample output 1: Priority problem areas (firm perceptions) 2.1 Are any of the following factors posing an obstacle to your business activities or the growth of your business? Vergi oranları İşgücü maliyeti Vergi mevzuatı Finansmana erişim Finansman maliyeti İşgücü piyasası İş ruhsatı ve faal. Mevcut beceri seviyesi Makroe. Belirsizlik Bürokrasi Elektrik Gümrük Mevzuat Su Telefon, internet Lojistik Mağaza/kapalı alan erişim Depolama vb. Siyasi ist. Kayıtdışılık Yasal sist. Suç, hırsızlık Doğalgaz Yolsuzluk Suç örgütü

84 81 79

77 77 76 75 75 72 69 67 63

56 55 54 53 53 52 52 50 49 49 49 48 48

40 45 50 55 60 65 70 Kaynak: UNDP –GAP Yatırım Ortamı Anketi 2013 *Soruya büyük engel veya çok ciddi engel teşkil ediyor cevabı veren imalat sanayii firmalarının yüzdesi alınmıştır.

Yüzde

75

80

85

90

A ToolKit for Regional Competitiveness Agendas

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Sample output 2 : Evaluation of existing policies / programs

Impact of organized industrial zones on firm performance 25 Number of days to get infrastructure connected: firms in OIZs and non-OIZs 20 15 10 5 0 non-OIZ

OIZ

Telephone connection

non-OIZ

OIZ

Elecricity connection

non-OIZ

OIZ

Water connection

Number of days to get licenses and permits: firms in OIZs and non-OIZs

120 100

80 60 40 20 0 non-OIZ

OIZ

Construction permit

non-OIZ Operation license

OIZ

non-OIZ

OIZ

Health&Safety permits

Kaynak: TEPAV – World Bank Investment Climate Assessment Survey 2005

A ToolKit for Regional Competitiveness Agendas

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Sample output 3: Evaluation of existing policies / programs

Effectiveness of the incentive system 9.3 Would you still invest in the absence of the current incentive and support programs?

9.4 Do you think that government’s financial incentives are adequate? (by sector)

Toptan Perakende 33%

Evet

İmalat

4

3

33

33

40

35

31

22

Kısmen, yeterli

Hayır 67%

Evet, yeterli

Hizmet

3

39

4 Bölge 3

38

0%

20%

37

35 40%

60%

22

23 80% 100%

Hayır, yetersiz Fikrim yok

A ToolKit for Regional Competitiveness Agendas

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2. Export performance and production structure analysis Purpose: 1. Assess regional production capabilities 2. Analyze transformation trends and patterns in export performance 3. Examine the sector and market structure from a global and regional perspective.

Methodology: Hirschman-Herfindahl Index , Theil’s Entropy, Hausmann Diversity Analysis, Revealed Comparative Advantage, Proximity / Density

Possible outputs: 1. Quality and diversity assessment of market production, export and integration; 2. Detecting potential transformation routes, identifying sectors / products that have better chances of surviving, if supported appropriately

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Caution: export vs. employment data Export data Advantages:  Manufacturing industry is represented by more sectors  Global analysis is possible  Easy to access. Disadvantages:  Provinces do not export everything they produce  Registration problem (customs) Methodology:  Compares economic structure of each city to that of developed countries  Quality sectors are defined as sectors

in advanced countries but not in the developing ones.

 Draws a roadmap for provinces to catch

up with developed countries

Employment data Advantages:  A better representation of city’s production structure  Lower level of missing data arising from registration problem  Covers services sector Disadvantages:  Manufacturing industry lacks sectoral representation.  Not able to make global analysis  Only for registered (formal) employment Methodology:  The economic structure of provinces are compare to each other.  Quality sectors are defined as sectors in advanced provinces but not in the developing ones.  Draws a roadmap for backward provinces to catch up with developed provinces such as Istanbul and Bursa

A ToolKit for Regional Competitiveness Agendas

Main steps for export / production structure analysis Step 1

Step 2

Assessing the current state of export /production structure

Identifying the possible evolution path for the export /production structure

Step 3 Shedding light on policy priorities regarding transformation

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A ToolKit for Regional Competitiveness Agendas

Sample output1 production structure analysis Comparison of cities ubiquity and diversification level

Kaynak: SGK *

Rekabetçilik: Bir sektörün ildeki toplam istihdamı içindeki payı, sektörün Türkiye’deki toplam istihdam içindeki payından büyükse, o sektör o ilde rekabetçi olarak tanımlanmaktadır.

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A ToolKit for Regional Competitiveness Agendas

Sample output2: production structure analysis – county level

İlçelerin sıçrama kabiliyeti (2011)

TR-33 region’s counties comparison of open forest and ubiquity level of each county

•Sıçrama kabiliyeti, bir ildeki mevcut becerilerle ortaya çıkması en muhtemel yeni sektörlerin sayısı kullanılarak endekslenir

Kaynak: SGK ve TEPAV hesaplamalar

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A ToolKit for Regional Competitiveness Agendas

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Sample output 3: Export structure analysis Revealed comparative advantage of top 3 most competitive sectors in Gaziantep 45



In last 10 years, top 3 most competitive sector of Gaziantep lost ts competitiveness

Açığa çıkmış mukayeseli üstünlük

40 35 30

25 20 15 10 5 0 6518 Dokunmamış mensucat

6572 Tufte halı ve yer kaplaması 2000

Kaynak: TÜİK ve Birleşmiş Milletler Comtrade veritabanı

2010

6594 Sentetik-suni lif iplikleri

A ToolKit for Regional Competitiveness Agendas

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3. External economic environment analysis

Purpose: 1. Analyze the current economic relations of the city (region) with neighborhood countries and regions 2. Identify opportunities and problematic area with a view to design an agenda for foreign economic relations (target markets, companies etc.)

Methodology: Analysis of international trade potential of the region; potential markets for each sector, big players in the selected countries, benchmarking region’s competitiveness against major competitors in target markets

Olası Çıktılar: 1. Key findings about competitive countries on export market 2. Assessment of the modes of adaptation to external economic environment Cooperation agendas (matchmaking, networking, joint incubator programs etc.)

A ToolKit for Regional Competitiveness Agendas

Main steps for external economic environment assessment Step 1

Analysis of trade performance in main markets

Step 2 Analysis of countries which can play a key role economic development

Step 3 Identification of investment strategy for current potential markets & sectors

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A ToolKit for Regional Competitiveness Agendas

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Iran

Syria

Iraq

A ToolKit for Regional Competitiveness Agendas

Sample output: Competitor analysis to identify critical sectors Exports of Iran and Turkey to the Iraqi Market

Kaynak: Birleşmiş Milletler COMTRADE veritabanı

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A ToolKit for Regional Competitiveness Agendas

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4. Value chain analysis Purpose: Mapping value chains of selected final products, analysis of all processes and identification of problems and propose well targeted interventions

Methodology: Survey, interviews, focus groups, data benchmarking, process and performance analysis, impact evaluation of the policies

Possible outputs: 1. Mapping value chain from first input to final product, 2. Identification of weakest and the strongest parts of the chain 3. Shedding light on the factors that affect growth, competitiveness, employment

A ToolKit for Regional Competitiveness Agendas

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Main steps of value chain analysis Step 1 Process mapping of the value chain

Kaynak: FIAS Dünya Bankası Raporu

Step 2 Analysis of current situation on each part of value chain

Step 3

Step 4

Identification of performance indicators and international comparisons

Prioritization of bottlenecks and developing interventions

A ToolKit for Regional Competitiveness Agendas

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Sample output – dairy value chain mapping Value chain of milk and milk products 1. Milk production 1. SÜT ÜRETİM GİRDİLERİ

inputs

ÇİĞ SÜT 2. 2. Production ÜRETİMİ of raw milk

Milk and 3. TOPLAMASOĞUTMA cooling

Milk 4. 4. SÜT VE and SÜT ÜRÜNLERİ milk products

5. SATIŞ SalesVE and 5. PAZARLAMA marketing DIŞ PAZAR İhracat

İthalat

SÜT ÜRETİCİLERİ KOOPERATİFLER & BİRLİKLER

CANLI HAYVAN

•İnek •Koyun •Keçi •Manda İthalat

İthalat BUZAĞI BESLENMESİ (%5)

Kaynak: TEPAV

SATIŞ NOKTALARI • Toptancılar • Hipermarketler • Süpermarketler • Marketler • Bakkallar

SÜT TOPLAYICILARI TÜCCARLAR

MAMUL SATIŞ

YARI MAMUL TEDARİK AÇIK PAZAR

• Ambalaj, Su, Maya vb.

İthalat

DİĞER GİRDİLER

• Gübre, ilaç • Tarım Makinaları • Veterinerlik • Suni Tohumlama • Hizmet Alımları

• Büyük Sanayiciler • Mandıralar

SÜT TOPLAMA MERKEZLERİ

YEM • Kesif Yem • Kaba Yem • Yem Hammaddesi

SANAYİCİ –Süt İşleme Tesisleri

LOJİSTİK – SOĞUK ZİNCİR

YATIRIM MALLARI TEDARİKİ • Üretim Makinelerı, Soğutma Ekipmanları İthalat İŞLETME GİDERLERİ

• Yakıt, atık maliyeti vb.

• Hazır Yemek Firmaları • Lokantalar, oteller vb. • Kamu ve Askeriye

FABRİKA SATIŞ NOKTALARI

A ToolKit for Regional Competitiveness Agendas

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Sample output 2: price comparisons Milk price for final consumer (€/lt) 1.0

0.9

Retail price of 1 litre of milk in Turkey and selected EU countries (€/lt)

Türkiye AB ortalama

0.8

1,1

1,1

0.7

0,9

0.6 0.5 0,5

0.4

0,5

0.3

0,3

0.2

0,3

0.1 0.0

2005

2006

2007

2008

2009

2010

Danimarka İrlanda

Türkiye

Almanya Romanya

Fransa

Letonya

A ToolKit for Regional Competitiveness Agendas

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Sample output3: benchmarking input prices Ratio of raw milk price in Turkey to the EU and US prices, 1999-2010

Cost breakdown of producing 1 liter of raw milk in Turkey Suni tohumlar; 1

Sarf Yataklık; 1 malzeme alımı; 1 Genel sağlık giderleri; 1 Uzun Hayvan ömürlü sigortası; 3 alet, makine Elektrik; 3 bakımı; 4

2.0 Turkey /US

Turkey/EU

1.5

Temizlik malzemesi; 1 Su; 0,4

Buzağı Kay bakım tuzu; idare masrafları; 0,1

İşgücü maliyeti; 4

1.0 Bina giderleri; 4

0.5

Diğer; 5

0.0

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

İnek sermayesi faizi; 6

Kaynak: LTO Süt Fiyatları İçin Uluslar arası Karşılaştırma, TÜİK, TEPAV hesaplamaları

İnek amortismanı; 10

Not: 1€ = 2,4 TL alınmış, Türkiye fiyatı Euro cinsinden hesaplandıktan sonra göreli fiyatlar hesaplanmıştır.

Feed +%3 55

A ToolKit for Regional Competitiveness Agendas

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5. Assessment of quality of life Purpose: 1. Assessment of quality of life at a regional and sub-regional level 2. Defining the framework conditions and actionable items to improve quality of life 3. Identifying those factors that can make the region more attractive for critical talent pool, to boost firm competitiveness

Methodology: Evaluation of current life quality indices, socio-economic mapping, citizens’ scorecard survey and analysis, analysis of correlation between firm performance and life quality

Possible Outputs: 1. Understanding the relationship between quality of life and competitiveness 2. Strategic action items to improve quality of life

A ToolKit for Regional Competitiveness Agendas

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Main steps for life quality assessment Step 1

Step 2

Step 3

Identification of competitor cities

Evaluation of the indices and creation of new datasets, based on surveys and score cards

Determination of priority areas, strategic action items

A ToolKit for Regional Competitiveness Agendas

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Citizens Scorecards: it is possible to create new datasets to measure quality of life at local level Manisa, TEPAV Citizens Scorecard Survey, Parks, gardens, services

Cleanness, waste collection

Electricity and city lights

Public transportation

A ToolKit for Regional Competitiveness Agendas

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6. Connectivity analysis Purpose: Assessing the quality of transport network, alternative routes, cost and finance Contributing to policy dialogue between central and local government

Methodology: Evaluations of current data and indices on connectivity level analysis, implementation of regional exercises by using regional data, creation of new indexes

Possible Outputs: 1. Identification of connectivity level of cities in the region 2. Identification of strategies and policies to improve connectivity 3. Project ideas to increase regional connectivity level and cost reduction – economic feasibility of connectivity related projects

A ToolKit for Regional Competitiveness Agendas

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Main steps of connectivity analysis Step 1 Evaluation of current studies on connectivity level

Step 2

Step 3

Creation of indices by the agencies

Creation and analysis of new datasets through surveys and desk research

Step 4 Finding policy priorities

A ToolKit for Regional Competitiveness Agendas

Slide 35

Sample output: Connectivity Analysis Is it possible to create an interregional index?

The World Bank LPI (Logistics Performance Index)

Turkey

Syria

Iraq

Bulgaria

Greece

Customs

32

104

102

41

94

Infrastructure

25

84

146

36

53

International Shipment

30

100

126

34

87

Logistics Competence

26

107

134

42

73

Tracking and Tracing Timeliness LPI Rank

29 27 27

125 73 92

151 122 145

48 47 36

63 67 69 Source: The World Bank

Rekabet Gücü Gündemleri için bir Araç-Seti Önerisi

Slide 36

7. Labor market (skill set) analysis Purpose: 1. Analyzing labor qualifications and labor market dynamics at the region/province level 2. Determining the skills needs of firms, and training requirements 3. Analyzing the harmony / mismatch between supply and demand 4. Forecasts about future (new skills, new employment dynamics)

Methodology: Compiling the current data regarding the features of region’s labor and demography, analyzing of surveys, survey datasets, comparing them with the current data and analyzing them

Possible Outputs: 1. Mapping the value chain form inputs to the last output 2. Identifying the strong and weak points of the chain 3. Finding out the factors affecting them

Rekabet Gücü Gündemleri için bir Araç-Seti Önerisi

Main Steps of Analyses of Provinces’ Labor Supply and Demand Step 1 Selection of competitor provinces

Step 2

Step 3

Demand and supply analysis of labor market

Identification of policy priorities

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Rekabet Gücü Gündemleri için bir Araç-Seti Önerisi

Slide 38

8. Local entrepreneurship ecosystem analysis Purpose: Identification of current phases of effective and local entrepreneurs in the regions identification of factors enabling and halting the advancement of these local entrepreneurs, constituting strategies and programs to advance these sectors, mapping the responsible stakeholders within this context

Methodology:

Utilizing datasets conducted by TUIK, TOBB, KOSGEB and international datasets, generating new datasets, entrepreneurship competitions and summits, constituting qualitative data through interviews and focus group meetings

Possible Outputs:

Identification of infrastructure in the regions that could generate entrepreneurial eco-system Mapping entrepreneurship eco-system in the regions

Local Entrepreneurial Ecosystem Development

39

Local entrepreneurship eco-system analysis Framework Conditions

Entrepreneurial Ecosystem

Human Capital

Identify Train

Entrepreneur Connect & Sustain

Enable Public Policy

Academia

Economic Activity

Celebrate Local Media

Innovation

Highgrowth ventures

Fund Quality of Life

Clusters

Kaynak: adopted from Koltai (2012)

Rekabet Gücü Gündemleri için bir Araç-Seti Önerisi

Slide 40

9. Regional innovation ecosystem analysis Purpose: Picturing the capacity of innovativeness of the region, identifying stakeholders and analyzing the perceptions of these stakeholders Identifying the deadlocks that prevent the ecosystem of innovativeness of the region

Methodology : Analysis of innovation indicators which are compiled from different institutions focus group meetings, surveys and interviews

Possible Outputs: Analysis of factors which effects the innovation performance of the region Designation of ideas to improve regional innovation system

Rekabet Gücü Gündemleri için bir Araç-Seti Önerisi

Slide 41

Innovation system in the regional level Local and national governance

• Role models •Taking risk •Perception of failure

•Laws •Regulations •Taxes and Legal Incentives

Culture of regional innovation •Education / Training •Labor Pool •Network

Kaynak: Aulet, 2008

Demand

Innovation activities

Entrepreneurs

•Infrastructure •Services •Techno parks

Infrastructure

•Economic structure •Firms

Finance

•Universities •Institutional Research and Development •Open Innovationn

•Credits •Equities •Other sources

Rekabet Gücü Gündemleri için bir Araç-Seti Önerisi

Steps of regional Innovation System Step 1

Step 2

Step 3

Analysis of regional innovation and input factors

Analysis of regional innovation and output factors

Setting priorities and developing a program

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A ToolKit for Regional Competitiveness Agendas

Slide 43

Nine pillars of the competitiveness toolkit Investment Climate

3

6

2

1

External economic environment analysis

Export performance Analysis

5

4

Quality of life analysis

Value chain analysis

7

Labor skills analysis

Connectivity analysis

8

Entrepreneur -ship ecosystem analysis

Synthesis, prioritization, producing a unique ‘competiveness story’

9

Innovation Ecosystem Analysis

Rekabet Gücü Gündemleri için bir Araç-Seti Önerisi

Slide 44

A unique growth story and competitiveness agenda for each region? A unique growth story?

A unique competitiveness agenda? 

Past

Times series analyses (so long as date permits!) Archive screening Chronology of key events Impact evaluations

Current Context

Future

Comparative analyses and benchmarking

A vision shared by stakeholders

Performance analyses

Scenarios for future

Causality analyses

Foresight work

?

A unique synthesis…

How should the «priority action list» of regional competitiveness agendas look like?  Unique, based on analyses  Based on priorities (most rational resource allocation decisions)  Supported by an effective governance structure, monitoring & evaluation, strong coordination devise  In harmony with other regions and national competitiveness agendas  Continuously updated (alive, feeds public-private dialogue