Keynote on Competitiveness by Michael Porter, Professor, Harvard Business School

Thank You mr. Goyal very powerful three points which I really saw I came through was one was that it the government has to be pro-business to really be pro-poor that's an exceptions to a story oh that's an exceptional idea because that's the truth or the paradigm thing the second thing which I really believe was absolutely great the idea of change in bureaucracy because I believe that is one of the LA last relics of the Raj which needs to be changed and changed very very strongly because if we don't do that we will actually get struggle stifled because of the bureaucratic hurdles or regulatory cliffs that can actually get created so having said that I think now is the time that we we have all been waiting for in fact we have professor Michael Porter with us in fact I've had the privilege of knowing him for the last 12 13 years and I have had the privilege of working with him on many issues over a period of time working in the area of competitiveness in the area of social progress shared value and so on and so forth and I'm also had the privilege of teaching his course on competitiveness and I he I always call him as my friend philosopher guide and of course this man needs no other introduction rather than saying that he's the father of the modern strategy field and without further ado may I welcome the man himself who is coming to India after 14 years professor Mike can we have you upstage [Applause] well thank you Amit for that wonderful introduction everything working here this is yellow there we go thank you well first of all it was just a pleasure for me even even though we've just started today to sit and listen to dr. dubrow it what a you know clear and lucid introduction to this day in fact I'm a little bit nervous now because he knows so much more about India than I do and the minister Gao also I think a very good clear rigorous start to our discussion today and as amid said I have been on a personal journey for the last 20 years trying to understand the fundamental causes of prosperity and the enabling ideas and approaches and thinking that would actually allow prosperity to be increased and sustained and broadened across a wide range of citizens in country after country my work started very much in the economic sphere that's how I'm trained but over time I have come to understand that we have to look beyond narrow economic factors if we're going to understand what leads to prosperity and I'll talk about that in a moment it's been very very long time since I have been here in India I remember many years ago I did a project with CII to kind of take a look at what was going on in this country that was in the early years after I published my book all competitive of Nations which started to lay out this framework and what we found then was just a lot of challenges and I have very strong memories of the big discussion about electricity and it was not enough not enough enough electricity and and we're in a very different place but I have been extremely excited to come back to India today because it's really quite remarkable what is beginning to happen what we know about building prosperity is it's a marathon you know it's not a short race it's a marathon it takes decades to really transform a country's potential and prosperity and to spread that prosperity broadly across citizens no one government can do it it's impossible what you can do in four or five years or ten years even is just move the needle you can't solve this issue what we find is that the countries that do best and that have made the most rapid progress have a very powerful way of sustaining progress it's not just each government doing its own thing and then the next government throwing out what the previous government has done and doing something totally different that doesn't work well there has to be a shared understanding of what really creates prosperity there has to be a shared understanding among stakeholders that they can collaborate in creating those circumstances there needs to be an ability to be to continue to pursue priorities and a strategy that that stretches over long periods of time so we've learned a lot about competitiveness over the last 20 or 30 years I've had the privilege of working with many many countries around the world on this topic including my own by the way in America today we are struggling we are we are facing some real competitiveness challenges and I think for a whole variety of reasons we can talk about those later if anybody's interested but I think what's fascinating to me and what's so important is what is beginning to happen in India because India has a special place in the world it has a special place for a lot of reasons you know it's big it's more than a billion people it's a de menthe your democracy a very big very complicated democracy that's special this is a country I think that is has a legacy that is very complicated a legacy of colonialism a legacy of bureaucracy a legacy of socialism a legacy of intervention ISM it's challenging for building competitiveness this is a country that has crushing challenges of lifting billions and billions if not billions and billions but at least a billion people or almost a billion people out of very very poor circumstances India is a country that we need to succeed that if India can succeed the influence and impact that will have on the rest of the world will be unbelievable so I am here because I am fascinated by what's starting to happen I'm here because there's a there's a whole lot of experiments and learning going on in this country about prosperity and about development and about competitiveness okay there we go all right so again I'm sorry we had that interruption because I think that I just want to let you know I believe personally I feel this very personally I think it's so fundamentally important that this country succeed and as I say something very interesting is happening I think there's an opportunity that may be unprecedented to make progress right now but if we're going to do that here in India we're going to have to think strategically about it we're going to have to think beyond a single government no matter how effective a given government is it takes decades we're going to have to most of all have a shared understanding of what success looks like what I find around the world is really one of the biggest problems of increasing competitiveness and prosperity is that lots everybody has their own idea of what that looks like that we have many different groups each of which has a different ideology and perspective and we can't create a common understanding a common reality a common kind of pragmatic understanding of what it takes to win so what I'd like to do this morning is not lay out a strategy for India I wish I could but I just come back after 14 years and I'm learning and frankly I learned a lot just sitting there and listening to these distinguished leaders talk this morning what I'd like to talk about mostly in this recession we have is what have we learned about competitiveness what have we learned about the fundamental causes of economic prosperity and the set of steps and choices necessary to move us in that direction what have we learn what do we know we've had a very rebel lucien and how we think about competitiveness around the world we've had a lot of false steps and and false directions and a lot of bad ideas but now i think we're starting to see a path and again i've been privileged to be at least a small part of that path in a variety of of countries and the question is what is that path how do we think about this topic of competitiveness how do we get away from simplistic ideas how do we get away from kind of little pieces that don't really capture the whole how do we deal with a complexity of any country and India of course is in a way the most complex of all that's what I'd like to talk about today I I will talk a little bit about India but I do it with great let's let's say sort of humility I don't know this country as well as you do but but I do know a lot of other countries and I do know a lot about what the process of building prosperity looks like so the hope is that as I talk about India I will open up some interesting ideas but frankly I'm very anxious to have our discussion later on I I'm very anxious to hear from you because I think it's actually going to be as we together understand the circumstances of this country in the context of a powerful way of thinking about competitiveness that is going to be the way to succeed that's going to be the path forward so you know where do we start when we when we start thinking about competitiveness and prosperity well I think we're the shocking thing about this topic can be seen on this chart this is like a dartboard look at the Mendes differences in prosperity among countries gigantic differences we're in a global economy you can go anywhere anytime you can trade around the world we're in a global economy look at those differences in prosperity look at how some countries are actually declining in prosperity whereas other countries are growing in prosperity this is one of the great fundamental challenges of humanity of why we have so many countries doing so poorly unable to make progress up but we also see some opportunities for progress we see some countries that have made great headway others that are stuck and the great puzzle of humanity today is what's causing this how do we how do we get ourselves on a path that allows us to improve our standard of living to spread prosperity across citizens widely not just for a few this this issue of how to drive improvements in sustained improvement in prosperity is I think the question of this age of the the issue in this global economy that we now live in although it's a little bit under siege right now India of course on this chart is in a good place now we'd like to see much higher income in this country so one of the questions we have is how to how to get off this chart onto the chart with the very wealthy countries but the good news is there's something going on in India that's very positive there's a growth here is meaningful and significant we've seen some progress the question then is how do we understand how to take this further now what we've learned is that if you want to progress your standard of living if you want to become more prosperous if you want to spread that prosperity more broadly across citizens you've got to increase your competitiveness we hear the word competiveness a lot frankly what we find is there's a lot of different definitions of competitiveness there's a lot of different ways of thinking about it one of the problems we have in countries is to get aligned what do we mean by competiveness competiveness happens when we can do two things at the same time first we've got to create an environment in the country where firms operating in India big firms small firms local firms and foreign firms where firms operating in India can compete successfully in domestic and international markets for a country to be prosperous business has to be successful if firms can't compete then nothing good can happen so that's that's part of competitiveness but we know that it's not just firms that have to be progressing a competitive economy is one where both firms can compete but the average citizen is also improving their standard of living we have to do these two things together we can't have business doing well and the citizens doing poorly that happens in a lot of countries that's not going to work that's not competitiveness we can have citizens with a lot of benefits and so forth but business not able to compete we've got to put these two things together we have to have business in an environment where it can be competitive where it can compete both again locally and internationally but we're also citizen do well this is the magic of successful competitiveness is where we can put these things together so many countries get stopped in one side doing well or the other you know in Venezuela the citizens have been given massive subsidies and all kinds of support and free gasoline and all this stuff but business in Venezuela can't compete Venezuela is being destroyed before our very eyes other countries we see and more typically we see business doing pretty well but the average citizen is not really benefiting from that we have to put these things together we have to see that business and society have to both win we have to create an environment where citizens win and business wins that's what a competitiveness looks like we can't have one group it's succeeding at the expense of another now in order to create this unique ability for both citizens and business to win we have to be productive if you if everything I say today you forget just remember one thing you have to earn your prosperity you have to earn it and you earn it by being productive productivity is the ability to create a lot of output valuable output per day of work if you can create a lot of value in a day of work because your skill because you have an efficient business environment then you can get paid a lot but if you can't be productive if you you have a lot of inefficiency and things are slow and there's no skills and and and you can't really produce a much productive work then you're going to have a low wage the wages are a relationship are tied to the productivity the number one central challenge of any economy that wants to be competitive is to build productivity for everybody and that that has that has many dimensions which we'll talk about in a minute we have to have existing firms and workers more and more productive over time the more and more productive they get the higher the average income is going to be this is kind of the iron rule of the global economy if you want to be wealthy you have to be productive but we also need high participation we need as many people in our society that want to work to be able to join the productive workforce that's called workforce participation it's not just having the people working being productive we also have to create an environment where people that want to work can enter that productive work force and because if most a lot of people aren't in the workforce it's very hard for your average annual income to get very high okay and India of course has a big issue with workforce participation we have a lot of citizens that aren't really participating in a very significant way in the economy and that is really holding down our income as a society and obviously it's it for those people that can't participate this system is not working for them so we have to think about competitiveness in a way that not just focused on the existing businesses and the existing people working in jobs we have to create an economic plan that focuses on getting as many people that really want to participate work into the productive workforce and that's that's a more complicated challenge in many cases because there are reasons why people aren't in the productive workforce and we've got a lot of people like that in India that we have to deal with competitiveness is being productive if you're productive you can have a good income competitiveness is not low wages you hear this a lot you hear people say well our wages are high so therefore we're not competitive well that's crazy the goal of competitiveness is high wages we want wages to go up that's the goal that's the point we also have a lot of people talking about currencies and say well the dollar is going up so therefore we're not-- not as competitive because the dollar is high well that's not competiveness the value of the currency we want the value of our currency to be high if a rupee is is is worth a lot that means that all of you can buy whatever you need from abroad at a lower price if your currency goes down that means that everything you want to buy from abroad which you need things from abroad in a modern global economy need machinery you need all kinds of stuff if your currency goes down that means you have to pay more for everything you buy from abroad we want to support a strong currency we want the country started getting wealthier their currency gets stronger not weaker and they could support that strong currency because they're productive and they're they're producing goods and services that are high quality and they're producing them efficiently so they can support that strong currency believe it or not this one slide is the most important slide in competitiveness because so many people around the world don't understand this they think somehow competiveness is due to you know some particular government policy or they think that there's all kinds of misunderstandings there's ideology there's there's there's there's blaming other people for your problem oh it's the rest of the world that's causing us to be poor no it's not the rest of the world it's us it's the kind of environment we create for business and for citizens to be able to be productive in engaging in the in economic activity that's what's competitiveness is all about and we have to deal with the fundamental drivers here we have to figure out how to create an economy that raises its productivity over time and we have to fundamentally create a successful environment for business one of the things I think everybody has to understand here is you can't have business not succeed and have the society succeed again I find there's a lot of nervousness about business some people are anti business they think businesses doing the wrong thing or they think business is not being ethical there's a lot of anxiety about business and there should be because businesses have done a lot of bad things around the world but make no mistake India is not going to be successful unless we create an environment where business in India is successful because business is our only institution in society that can actually create well for-profit business is how wealth is created when when a company is able to meet a need create a product meet a need and do it efficiently and productively and make a profit that's how wealth is created government is really important but it can't create wealth it can take it can it can levy taxes and use the tax money to do important work NGOs can't create well NGOs are really important they they allow us to deal with a lot of societal needs we have a lot of NGOs in in this country to help deal with all the societal problems that you have but NGOs can't create wealth either they have to depend on donations and support from people they care and thank God many here do support those organizations but they can't create well only business can create wealth we can't be anti business and pro prosperity Indians have to understand this there's a legacy of business in this country that has many people very concerned and even angry we have to get over that we have to create an environment where business can thrive and we have to have citizens that understand that that's that's part of building the prosperity of the country we've got to make that work we have to deal with the abuses we had really a bad some bad business government relationship in the past we got it we got to change that relationship we've got a harness business to be a force to actually enhance and spread prosperity to everybody and business can do that but we have to think of differently about business then has often been the case here in this country if we can just understand this one slide and actually live this we can put aside all the old ideas and all the old anger and frustration and ideology and history we can put aside that and just be practical and say look it's all about creating a productive society a productive economy in which anybody that wants to come participate that's what it's all about and and we've got to got to figure out how to get there that's what competitiveness is all about and I have seen miracles happen when societies and leaders can get aligned on this way of thinking and where everything is about how can we be more productive where every citizen is thinking about how can I equip myself to be more skilled so I can be more productive where every business is thinking I don't well I don't not about getting a special favor from government or a certain subsidy where businesses think about what what do I need to do to raise the bar and be more productive that's what we have to create in this country and it's happening it's happening it's not happening enough it's not happening in a broad enough base so what do we know we also know that when we try to build a productive economy and drive prosperity we can't just think narrowly about economic development you know I used to think that we could but what I've learned over these years of working in this field is that actually there's a fundamental connection between economic development and social development we can't have a healthy economy with a sick and broken society it just doesn't work not as a matter of justice yes that's an injustice but it's not just that it's just a practical reality we can have economic success and productivity that causes it if a lot of people are sick or uneducated or don't have a decent place to live we have to see economic development and social development is not different things but the same thing synergistic we have to do both together we have to think strategically about how to move both of these issues if we focus just on social development and forget the economic development then we're going to quickly run out of money but if we focus only on economic development and forget about social progress then we're going to run out of capacity and we're actually not going to be successful in moving the economy so we've start to see these things together and we'll talk this afternoon about the social progress work that we've now done and the measurement of this and how to think about it and how to drive social progress we'll talk about that this afternoon so given this background I think India has made significant economic progress I think everybody sitting in this room should be optimistic now I know there's a lot of debate in India about everything you know you guys are really good at that you have a you're productive and having a lot of debate and there's a lot of you know people worried about this thing in the government or this policy or that policy we've got a lot of debate this is a this is a democracy after all it's messy but there's no doubt that something important is happening we're seeing some significant economic progress despite a relatively challenging global environment you know all this GDP growth GDP per capita growth productivity growth are rising we're starting to move we're starting to move we are seeing not enough yet but we're seeing more money coming in for an investment we need a lot more but but it's starting to happen we're seeing poverty rates go down there's still many too many people in poverty but we started to see progress okay something good is happening we need we need to start getting together a sense of possibility here a sense of optimism the policy choices that have been made over the last few years and this in this new government are starting to deal with some of the real fundamental problems this country is have for a long time a macroeconomic set of policies fiscal and monetary policy that's actually sustainable and more robust and sounder what we might talk about that a little bit later you know public programs delivering public programs better and more efficiently what we we might mention that later you all know some of the key things the digitisation the Financial Inclusion things like that that are that are going on corruption that the international data is showing that we're looking better starting to make headway against that that is a big big deal different parts of the business environment are starting to get better there's evidence of that infrastructure making some progress skills we have a you know significant campaign to deal with that the business regulations are getting a little less crazy and complicated and allowing more vitality and and and and opening up opportunities for for more and more elements of the business community in this country so there's something important happening here there's no doubt about it the real challenge is where do we go from here taking some really important steps but clearly we got a lot of issues still this country is far from done and as I said before it's going to take at least 20 or 30 years to truly transform the economy we've still got a lot of weaknesses we've still got a lot of distortions we've still got a lot of policies it needs to be fixed and it's going to take a lot of work and you know informality is still very high and informality you know is understandable we have to reduce the cost of formality we got to make it enticing and attractive for businesses to want to be affordable you know and and and get the benefits and support that comes from being a real company that's registered you know it's official we got to find a way to deal with informality over time we still have got a tremendous amount of bureaucratic complexity it's mind-boggling and you all know it better than I do but it's even mind-boggling to me when you're three days I've seen it with my own eyes just complicated access to capital remains us to giving a problem education needs to be improved infrastructure although there's been some progress is still a huge problem if you know if you don't have good infrastructure how can you be productive if you're sitting in traffic wasting money you know what when business when when you sit in traffic you're reducing everybody's wages because it makes you so unproductive that that you can't afford to pay higher wages we think of these things it's just annoying things but actually the inability to create a productive business environment is actually reducing what we can get paid because we can only get paid what we earn in terms of the productive output that we can we can develop so stuff like this we can't we have a lot of things to do and what I believe is the government is on a on a path to deal with these things I think a lot of the things we're talking about make a lot of sense but in order to get it done in order to get it done we need you know three things one we all need to agree on what we're trying to do on what competitiveness is what it looks like what are the key elements what's the role of government what's the role of private sector what's the role of states what's the role of federal we have to have a shared understanding we can't be fighting over what works we have to agree on what works we have to have a consensus on what works the best and most successful countries have this common understanding the citizens and government are sort of on the same page number two we have to have a strategy one of the things we'll talk about in a minute is competitiveness is affected by almost everything the roads the schools the ports the the culture almost everything met affects competitiveness so we've got literally hundreds of things that have to happen in order to build a competitive economy and you can't do hundreds of things at once so if you're really going to make progress on competitiveness you have to have a strategy you have to have a strategy that says okay here's where I'm going here's what we're going to do now and then after that we're going to do the next step and the next step and the next step we have to have a sense of priorities we have to know what do we need to do now what is holding us back now let's not try to do everything at once we've got to have a strategy that we've learned that over and over in country after country and we have to be good at implementation we have to actually get things done we have do things efficiently and that is a revolution in how government runs governments are typically not set up and managed around delivering results getting action and doing the efficiently and moving things along and holding people accountable that's not the way government works if we're really going to succeed at this we have to actually change the way government works and we also have to change the way the other stakeholders kind of interact with government in a way that allows us to be effective so I am extremely optimistic that we're starting to get on the right path here in this country you know the last time I was here a long time ago it was kind of a mess not the talent not the skill not the commitment but the thinking strategy I think we're starting to be on the right path but we got a long way to go so how do we think about competitiveness and how do we define our agenda for competitiveness well what we found is that to understand competitiveness you have to understand a sort of a broad sort of holistic framework competitiveness in any in any country or region or state starts with what we call your endowments every country has endowments endowments are things like you have land you have maybe some natural resources to include things like growing conditions where you can grow crops and things like that you have a geographical location you use you're somewhere in the world you have certain neighbors that you trade with you you have access to the ocean so that you can ship goods you know more efficiently you have a population a very large population in this in this case you have a certain land area all these things are endowments you inherit your endowments you inherit this from history from long past and the endowments matter for competitors if you have a very very favorable endowment during a good location in the world if you have good access to the ocean if you have you know a lot of natural resources that helps that helps create prosperity that's the kind of foundation on which prosperity is built but what we found is that just relying on natural endowments or inherited endowments doesn't usually get you very far it's particularly clear with natural resources if you have a lot of oil or something like that it feels good you know you got all this oil so you can pump the oil and sell it but what we find is many many oil-rich countries don't do very well back to my example of Venezuela I got a lot of oil but they're getting poorer and poorer and the reason is it's not the endowment you have it's how you utilize your endowments your ability to utilize your location the ability to take your natural resources in and and productively turn them into other other strengths that you can an investment capital that you can use to improve your business environment so endowments are important we have to understand what they are we have to figure out what unique endowments we have in this country to draw on and we got to take advantage of those and that can include things like history and culture because that that can attract people to want to come we've got to think about those endowments every region of India that when it develops its strategy has to understand what it's particularly dominants are and build on them and and and bring out their productivity but this is not going to get us to prosperity this is not going to get us to prosperity to get to prosperity we have to add two more layers one is what we call macro economic competiveness we have to have a sound and stable set of macroeconomic circumstances that cut across the entire economy one is a monetary and fiscal policy we have to have a stable monetary and fiscal policy we got we got a we've got to get our spending aligned with our inflow if we have budget that's totally out of balance we're going to create instability and that's going to reduce investment and that's going to reduce productivity we need we need a stable monetary policy hopefully keeping inflation low we have to manage that we need a sort of a way of managing the economy that that minimizes economic cycles and shocks and that has to do with banking a regulation in our central bank and and a whole lot of institutions so this country is making good progress on the macroeconomic side this is one of the great things that has been accomplished over the last few years we got a we got a ways to go the public spending at the state level is not quite as balanced with the revenues we've got a lot of state deficits but the federal level we've made a lot of progress we're going to have to extend that progress more broadly but this is critical to competitiveness if you've got a high inflation and economic instability it kind of stops progress on productivity and the business environment we have to we have to have human development and effective public institutions we you know if people aren't educated we're not going to be productive the people are sick I can't go to work we can't be productive but it's about equity but it's also just about reality we have to see that we've got to make progress on on these issues of human development and you know if a lot of our people don't have access to work because they're discriminated against that's not good for productivity we need our people that have access to whatever they need to equip themselves to be productive member of the economy so human development really matters we've got to have a society that we rule of law where people have to follow the rules and where if you don't follow the rules there's consequences because if we have no rules we can't be productive and we just we've seen that over and over again in country after country and we have any government institutions that are actually effective that they deliver what they're supposed to deliver whether that's a good regulation or whether that's various public services and I think there's a real effort in government here in India today to kind of make government the machinery of government actually be work well and be efficient and so that's good so we're making some progress here on the human development front we again what we found is you need a you need both economic progress and social progress to progress I together I made this point earlier we'll talk about this this afternoon there's we're starting now to have a very systematic way of measuring the health of a society and the the basic human development of citizens and this this will talk more about this afternoon we are starting to measure how well we're doing there's a very important effort in India now event and and Michael Green from social progress imperative we'll talk about this over coming weeks where we're starting to measure social progress state-by-state by staying with multiple dimensions and this is not this is not surveys this is actual best best hard data we can find and and what we're seeing is is good because if we look at how things have happened had progressed from 2005 to 2016 virtually every state has improved on these measures of well-being and education and food and nutrition and this the set of factors that really matter in terms of you know human development and social development so again we're making headway here but we've got to make sure that we continue to pursue this agenda this is a country where we if we're going awfully be a successful country we have to solve the social agenda we can't just focus on the economic Stender we have to do both together and they'll be synergistic so that's level 2 endowment is level 1 that's our base that's what we inherit our macroeconomic circumstance that cuts across the entire economy that's kind of level 2 we've got a raise of are there monetary and fiscal human development public institutions but what we found is that true prosperity comes from that third lever layer what we call micro economic competiveness and micro economic competitiveness starts with uh firms this guy just doesn't like me okay here we go it starts with companies if you don't have productive companies you can't have a productive economy companies have to be managed well we have to raise the standard of management in our companies we need companies that are good at operations that are good at manufacturing that learn to be efficient in the use of their employees so we have to raise the bar in the business community we've got some world-class companies in India but we got many more companies that have a long way to go in being world-class best practices of Management and this is critical to the competitiveness agenda we can't just worry about government policy we have to we have to worry about how our business community is progressing and we got to be raising the bar and and and that includes the smaller companies and even the informal companies because again remember the iron rule prosperity depends on productivity you can only pay yourself based on how productive you are because we're in a global economy so we got to worry about our companies we've got to worry about the business environment in which companies operate we can have great companies but if they're in a lousy business environment they're going to be ported they won't be able to be productive they won't be able to be successful and so we have a lot of work to do on raising the business environment government is working on this but it's complicated this is the kind of framework now that is pretty well accepted for looking at the business environment it's usually called the diamond model because there's you know there's four corners and and and what we want to do is is polish this diamond we wanted to get better and better and better and the more the better quality in the business environment the more productive firms are able to be so the business environment has to do with things like how good are our human resources do we have enough skill so that companies can hire people that will actually be efficient and do work is there enough capital available to invest in stuff and this is an issue in India it's just not good yet good well-developed access to capital physical infrastructure talked a lot about that again you know if the infrastructure is bad then it's just like having a drag on every single company and that includes electricity as was said earlier by the minister if you can electricity efficiently it's pretty hard to run an efficient company if you have to do everything manually without power a scientific and technical infrastructure we've got to be able to infuse our companies with with better technology digital is key for India and there's also what we call the administrative and regulatory infrastructure how complicated is it for a company to navigate if it's complicated then it drags us down in terms of productivity and it and the more complicated is to lower the wages are going to be because we're not delivering a very good output so there's a there's the inputs having the right incentives I mean we've had too many subsidies and we had we haven't had enough competition within within India you can you can read some of these areas we have to create an environment where companies have to compete what we know is if you can't if you don't have to compete you're not very productive and we've got you know we have too many companies here that have a legacy of really not having to compete so therefore they do well but they're not productive therefore they're not really lifting the economy we need we need local needs that get more and more demanding we want local consumers to expect quality and demand it we want government to actually be a demanding customer government buys a lot of things the best governments that do competitive as well use government purchasing to drive the economy for not by the size of their purchases because they they want better goods they they they use government purchasing as a way to raise the standard of Industry and we need supporting industries you need to be able to find a supplier if you need a component you need to have somebody you can buy that from having to do everything yourself is not efficient it's not productive so we have to keep moving the business environment we've got to keep moving it forward you know and in any country I mean this is Peru I've done a lot of work on a national strategy for Peru and Peru is moving and hopefully you guys can move just as fast as Peru is moving it's much easier to prove it's not easy but it's much easier than this country because of the complexity of diversity of the history but you know Peru has got some real strengths but they've got a lot of things to fix in their business environment their rigidity of employment is too high not enough competition not very many suppliers and so on you can you can see that what we have to do is we have to really honestly assess our business environment in India systematically with real data and we've got to get on a path of raising the bar and that's the only way we're going to become more productive and therefore that's the only way we're going to see you know sustainable rise in our standard of living and I think this government is beginning to do that there's a long way to go you know part of the business environment is is sort of all these things that have to do with the cost of doing business you see you know how hard is it to get credit how do how hard is it to deal with bankruptcy how hard is it to register property how hard is it to actually trade how much bureaucracy is there involved in exporting and importing all these things if it's hard to do business then it's not going to be productive you know a lot of people ask well why aren't there more foreign investors coming into India it's because of this stuff it was hard to do business here then they're going to find some other place and and they're going to operate there so we're competing to have an efficient business environment that's what we have to that's what we have to understand and this is the World Bank doing business indicators one of the things I'm delighted to hear is actually the government is using these indicators which are very well accepted around the world and measured in a pretty good way they could be better but in a pretty good way they're using this scorecard to actually drive both national government policies and state policies and I've seen this in a number of countries where there's literally a whole team in the government that looks at these things and says how can we make our ranking better what do we have to do what do we have to fix what laws do we have to change how can we get that permit in one day rather than have to take six months to get that permit all this process of just raising the bar and stripping out a lot of wasted effort and wasted time and bureaucracy and craziness this is how you build prosperity we're seeing that happen in this government it's very impressive to see that effort at the nitty-gritty not just grand policy pronouncements but nitty-gritty raising the bar and a final thing in the micro economic environment is really important for India and that's the concept of clusters and what's a cluster cluster looks like this this is a simple example of a cluster what we find is that economic development and economic growth are accelerated where you can create a a critical mass of companies and supporting industries in the same field usually in the same geographic region this is a tourism cluster in Australia I'm just showing that because we all understand tourism and what it's like and you can see tourism is more than just where are you going to visit tourism has to do with the hotel it has to do with a roof eat meals it has to do with the transportation the taxis the cruise ships the restaurants the travel agents but a cluster also has to do with the suppliers the food companies the property services companies it has to do with you know things like souvenirs and being able to change your money what you see is if you want to be really really special and excellent in tourism you can't just have one hotel and one one place to go and look you know you need the whole cluster it and if you have a strong cluster you're much more productive these companies are all reinforcing each other and if we can gather a cluster we find that we have tremendously better productivity and innovation but we also need some public institutions educational institutions who's going to train the people to work in the hotels we need to make sure that happens and so that's that's part of the cluster as well we have some of these in entré India we have the pharmaceutical cluster well-established this is what a competitive economy looks like when we can build these and we got to build hundreds of them all across India there's there's quite a few efforts underway here but but we have a long way to go and what we know is if we can build these clusters this is the ticket to turbocharge and accelerate our competitiveness improvement it's what we find is this is how you grow jobs rapidly you create these clusters this is how wages go up how innovation goes up how new businesses form they form within these things that's the new best new thinking about how to accelerate economic development is cluster based policy and you know we have we have some clusters whoops this data something wrong with this slide so good I'm behind so I'll just forget it you know in any economy there's a lot of clusters we've done we've done fundamental work on this looking at economies from all over the world and and India has some interesting positions in a few of those areas but it's such a large economy we need to broaden the number of areas where we have a critical mass where we have these clusters and we got to build on the ones we have and make them better and more effective and more efficient the things in yellow and green or areas where India is relatively strong this is using this is based on our trade position the way economies grow is they build from cluster to cluster to cluster to cluster you know this is the Singapore story you all know that story Singapore now has quite a diverse economy but it started out which is basically shipping but they built transportation and air travel on top of that and then they started in financial services but then they built businesses on top of that and attracted regional company headquarters and then then they move into higher education to really support a higher wage workforce you can see the trajectory they started in chemicals but built on that to create a pharma industry this is the way economies develop from cluster to cluster to cluster and clusters that are related one cluster leads to another one that's related that's the way Economic Development really happens and we have to get that dynamic market working in in India and clusters are a very powerful tool to bring SMEs together with big companies to drive progress now again we we are very short of time here I this cool we have a 50 session course that we talk what were we really trying to learn the details of this this is a really complicated issue there's there's a whole section in this presentation that talks about you know national is important but actually regional is more important much of what matters for competitiveness is not national it's region by region the circumstances in each particular area so what we've learned is if you want to do competiveness you've got to decentralize you can't do it centrally you've got to get each region thinking about its unique situation and raising the bar each region each state has to have its own strategy one state shouldn't try to copy another state that doesn't work a state should be looking for okay what's unique about us what's our base of business how could we build on those how could we make ourselves more unique how can we raise the bar on our business environment that's the way it works and you can see a whole there's a whole set of slides here that you know please look at there are tremendous differences across States in prosperity because they're competitive circumstances different this is our country we have huge differences across States this is your country whoops what happened is that a message that's a very pretty slide by the way I will be philosophical now okay so we we had a little bit of a glitch I'm having trouble this is not clicking very well okay let me say again on which side my side over here oh good so this is just an example of how the different states in India have different clusters so this is good we want to build on this at the end of the day hopefully I've given you a flavor for what we have now learning about how economic development really happens what really drives productivity growth coming out of all of this is this fundamental idea that we need to have a strategy we can't just work on every little thing separately this is too many things so we have to have a strategy we have to kind of understand it for a state or even for the country as a whole where are the priorities right now what do we need to do first what do we do next let's pick five things now then we'll do five things in a year and five things with the year after that so that we can really put our energy behind it implement get things done move the bar the government has made some key decisions like that on areas like digitization and and others which I applaud we need a strategy I think we have the beginnings of a strategy I think we can raise the bar and have an even clearer strategy I think that's true at the state level as well we have a strategy we have to have a value proposition what's our place what's our unique position we need to get government aligned with competitiveness governments are usually too fragmented there's too many different ministries everybody's kind of doing their own thing we haven't have an integrated strategy where all the parts of government are working in a coherent way and and this is something that again will be an important issue we got to get the private sector involved in competitors the private sector has not been the force for competitiveness improvement in India that it should be we have to change the culture and the resents of responsibility of the private sector the private sector can have a profound impact on the success of competitors if we've seen the successful countries the private sector is always involved and they don't see it as charitable they see it it's actually creating an environment for them to get more competitive at the same time and that includes dealing with social issues this concept of shared value Minister was talking about this this is something that we now understand that that business has a very powerful role in dealing with social problems bringing more people you know into the workforce improving skills improving the business environment and and we need business to have this broader view of its role in India than it has historically that is an opportunity so kind of just to wrap up here what are some of the themes that I have come to believe number one in this country given the unique circumstances we've got to have a broad-based inclusive economic strategy development strategy we can't we can't be narrow we can't be just focused on you know GDP and economic policies we have to have a broad to get the get all people excited and involved we have to have a sense of inclusion we have to have a sense that opportunities are getting better for my kids not just me but even for my kids people have to start to have a sense of hope that they can actually progress that there's an opportunity for them things are getting better otherwise we'll have populism otherwise will not get anywhere that's number one number two we need to move more to the cluster based model see the power of that to accelerate development to accelerate change clusters allow us to get not small businesses and informal businesses together with big businesses and and we have a whole tons of learning now on how to do this we haven't done it in India India has not been very aggressive in this new way of thinking about development it needs to change we got to clarify the roles of the national and the state government we're moving in the right direction we can do it a lot better there's still to me a little bit of a lack of clarity on who is responsible for what and how do we hold people accountable we've got to get the private sector to be a true partner in development it hasn't been in the past it's it's not the private sector companies haven't tried to do good things so many have but not enough and not the right things we need to we need to raise the bar we need more data back to the professor at the beginning talking about you know data we got to benchmark ourselves we've got to be honest honest honest honest you've gotta know the facts oh we got to start measuring more stuff social stuff economic stuff there's a lot of effort submit and his team at the Institute are being very very important role in improving transparency and improving benchmarking and improving the data available to make policy to make better decisions and then I think finally we need a shared vision for the country right now I think there's a there's a lot of optimism in some circles there's a lot of angst and controversy we have to find a way to get citizens of this country to understand what they could become the best success in economic development is has to inspire people it has to sort of start to describe a future that is very attractive a future that people can imagine that will will motivate them to collaborate and to work with others and to tackle the issues that have to be tackled we need a vision of what India could become of what role it could have as a society of how we could lead what the country really stands for that we have a lot of diversity in this country and tremendous diversity of differences of views and you know religions and all kinds of diversity of circumstances in this country we have to find at least at some level a way to have a common view of what a good future would look like that's inspirational that will get people to help move the ball forward as opposed to fight for their little point of view or their little issue or their little special concern okay so this is intangible but I can I can tell you that in my experience in many parts of the world this really matters and so we have to find a way to in a way create this unifying sense of opportunity and I think you can well look this is one of the most complicated problems on the face of the earth how to build prosperity hopefully I've given you some thoughts about how we now understand it what its dimensions are what some of the key issues are what some of the pitfalls and thinking are that confuse people hopefully you've gotten a flavor for the challenge I made a few comments about India but I'm learning we need a very serious and fundamental strategy to make all this happen hopefully we can all now start to see how we play a role everybody in this room plays a role in the economic development and competitiveness of this country and and those are different roles depending on which sector you're in depending on what kind of company you're in depending on what role you're playing in government or whatever we've got we've got to start to see how we fit in we have to start to see how we can create leverage through collaborating and integrating with other actors and I think just in conclusion I think we have to we have to have a shared commitment that we're going to get better that we're not about obstructing we're not about slowing down or not about complaining we're about getting better and and how do we put that culture in place I think I think it's it's it's it's the opportunity it's painting a picture of a future that citizens in this country can get really really excited about I'm confident you can do it but we have a long way to go so thank you and let's continue the discussion

Channel: arthsastra

Views: 52,008

Keywords: Competitiveness, City, Cities, State, States, Provinces, Development, Economic, Research, Report, Competition, Strategy, Regional, Nations, Governance

Id: OXY2CnfJakc

Length: 74min 52sec (4492 seconds)

Published: Tue Jul 04 2017