Clusters and regional value chains in the Danube Region

1. Clusters and regional value chains in the Danube Region Presentation by Alan Paic Head, OECD Investment Compact for SEE EU STRATEGY FOR THE DANUBE REGION – 2nd Workshop of PA8 "Cluster Networking and Development Prospects in the Danube Region“ 12th and 13th September 2013, VUKOVAR,CROATIA

2. Overview of the OECD Investment Compact for South East Europe Mission • Created within the Stability Pact for South East Europe in 2000 • A regional programme to support governments to increase growth, investment and employment through targeted business climate reforms Geographical coverage Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Kosovo*, the Former Yugoslav Republic of Macedonia, Republic of Moldova, Montenegro, Romania and Serbia Areas of work • Implementation of the “SEE 2020 strategy”, a roadmap which has been adopted at the South East Europe Ministerial Conference in November 2011. • Smart growth - Support to innovation • Sustainable growth - Support to SME Policy • Integrated growth - Support to free trade under CEFTA2006 Methodology *This designation is without prejudice to positions on status, and is in line with UNSCR 1244/99 and the ICJ Opinion on the Kosovo declaration of independence.

3. Next Generation Competitiveness Initiative Methodology Objective Support competitiveness of clusters in South East Europe by removing barriers to higher value-added investment and monitoring commitments. Identify 3 regional sector-specific working groups comprised of Western Balkan clusters, businesses and government officials Assess the barriers to higher value-added investment both intra-regionally and externally to the Western Balkans Transfer policy tools and actions to enhance the competitiveness of 3 sectors through pilot projects

4. Geographic coverage Danube Macro-region Geographic coverage of Next Generation Competitiveness Initiative

5. Analysis of export performance and demandgrowthreveals relative strengths in the Danube region in manufacturing…

6. …and in services

7. Supply Chains and Revealed Comparative Advantage • Revealed comparative advantage (RCA) captures relative trade specialisation dividing an industry market share by the manufacturing market share for exports (or imports): Market share of country c in world exports in manufacturing Market share of country c in world exports in industry k • An RCA higher than 1 implies that country c has a RCA in industry k. • For example, an economy has a RCA in exports of intermediate food products, if its share in world exports is greater in intermediate food products than in overall manufacturing.

8. The RCA matrix helps identify economies’ positions in supply chains RCA in final good exports No evidence of supply chains Final stage supply chains No import specialisation in intermediate products Import specialisation in intermediate products First stage supply chains Intermediate stage supply chains RCA in intermediate good exports Source: OECD (2012)

9. Example 1: Austria

10. Example 2: Hungary

11. Example 3: Croatia

12. Example 4: Serbia

13. Example 7: Romania

14. The Danube region economies present supply chain complementarities in selected sectors Economies’ positions in supply chains

15. Examples of pilot projects to be implemented • Cluster policy review according to best practice • Skills gap analysis for one sector across the Western Balkans potentially complemented by an internship scheme • Developing a regional investment promotion strategy for a specific sector. • A region-wide Triple Helix partnership project which would result in concrete innovative products and services; • Identifying non-tariff barriers to trade in the sector which would allow better flow of goods and services across the region, and design measures to remove those barriers; • Improving mobility of professionals across the region to allow skill pooling,

16. Moving from lower to higher value-added activities

17. Expected outcomes of the project • Connect clusters, develop regional value chains and strengthen the competitiveness of key economic sectors • This involves expedited implementation of policy reforms with a focus on three specific sectors deemed to possess comparative advantage, and reinforcing that advantage in the global marketplace. • Positive macro-economic benefits: • improved trade performance (through increased export sophistication), • increased government receipts from a more productive business sector, and • positive developments as regards labour market outcomes (which would in turn have positive impacts on government accounts). • Officials with enhanced capacity to conduct competitiveness-related reforms; • Enhanced dialogue between the policy makers and the private sector.

18. Next steps • Project duration: April 2013 – April 2016 • Financing secured: 5 million euros from EC DG ELARG and OECD • Project is part of Danuclus within PA 8 of Danube Strategy • Inclusion of Northern Danube countries • Immediately: For expertise and good practice transfer • 2014: potential to expand full scope of project through complementary financing

19. Thankyou for your attention Alan Paić Alan.Paic@oecd.org Head OECD Investment Compact for South East Europe

20. Next Generation Competitiveness Initiative in context Albania, Bosnia and Herzegovina, Croatia, FYR Macedonia, Kosovo*, Montenegro, and Serbia 2012 2010 2007 2008 2011 2009 2013 2014 2015 * This designation is without prejudice to positions on status, and is in line with UNSCR 1244 and the ICJ Opinion on the Kosovo Declaration of Independence

21. Roadmap 2013 2014 2015 Analysis and short listing of sectors Identification of 3 sectors and designation of sector working group membership Launch of first sector working group Identification of key constraints limiting sector competitiveness Design regional pilot projects in each sector working group Implementation of pilot projects in each sector group Completion of sector-based pilot projects Review of pilot projects and extraction of lessons learned Monitoring of reforms as a result of sector-based pilot projects Greater time and staff commitment 21

22. The OECD at a glance Who we are What we do • Sharing of good policy practices, peer review and policy dialogue in: • Anti-corruption • Competition and Financial markets • Corporate governance • Development • Economic growth • Education • Environment • Employment and labour markets • Governance • Health and social care • Industry and Entrepreneurship • Investment • Private Sector Development • Regional, Urban and Rural development • Science, Technology and Innovation • Tax policy • Trade, etc. • Setting international standards on domains ranging from agriculture and tax to the safety of chemicals. The OECD is an international organisation with 34 member countries: • USA, Canada, Japan, Australia, New Zealand, Europe (20 of EU-27, Switzerland, Norway, Iceland) • Chile, Mexico, Israel, Korea, Turkey …and a growing number of key partners • Brazil, Russian Federation*, India, Indonesia, China, South Africa totaling more than 80% world GDP and 64% of the world’s population. The OECD’s mission is to promote policies that will improve economic and social well-being *in accession process

23. The Investment Compact supports competitiveness through work on investment, free trade and SME policy

24. Example 5: Bosnia and Herzegovina

25. Example 6: Montenegro Final Stage Supply Chains

26. Example 8: Moldova