By Fadi Farra, Adjunct lecturer in Public Policy at the Harvard Kennedy School of Government and Head of the Eurasia Competitiveness Programme at the Organisation for Economic Co-operation and Development (OECD)*
I am often asked why Central Asia is the ‘next economic Frontier’. The answer is both simple and complex: After two decades of economic reforms, the labour productivity growth of the region is constantly performing above world average but the labour productivity in absolute terms is still about… 80% below the average of the world. The same pattern applies to countries of Eastern Europe and the South Caucasus. The graph on the right highlights this labour productivity path from 1993 to 2008.
So what should countries of the region do to bridge this competitiveness gap? Of course reform priorities differ by country but all have a similar imperative: Enhancing human capital policies, improving access to finance for entrepreneurs and implementing a second or third generation of investment policies to attract higher and better investments. Those are however known priorities. The question is how to make it happen.
On one hand, policy priorities seem to differ whether you ask the private sector or public sector (see graph on the left). On the other hand, not enough linkage is made between Foreign Direct Investment and higher national labour productivity.
- How to effectively engage the private sector?
- How can Foreign Investors help enhance national competitiveness?
- Which policy levers to pull first to enhance competitiveness in the longer term?
- Where to start first: at the national, sectoral or sub-national level?
Those are all questions that I look forward to discussing with participants of the World Economic Forum on Europe and Central Asia in Vienna.
*Fadi Farra will attend the World Economic Forum on Europe and Central Asia in Vienna, Austria 8-9 June 2011 and is guest blogging for the Forum.