Neighbouring Countries

National Value Proposition

What is the unique value proposition of the nation or region given its location, legacy, existing strengths, and potential strengths?

What roles in the neighborhoods, the broader region, and the overall world economy?
What unique assets as a business location?
For what types of clusters and activities?

Developing Unique Strengths

What elements of context and the business environment can be unique strengths?
What are the existing and emerging clusters?

Achieving and Maintaining Parity with Peers

Has the country articulated a distinctive position?
That will create a positive identity for the country?
That will inspire citizens?
Does the strategy build on strengths?
Are the strengths realistic versus neighbors and other peer countries?
Does the strategy fit with trends in the region and the world economy?
Is the strategy realistic given the country's weaknesses. Can those weaknesses inconsistent with the strategy be neutralized?
Are social and political reforms integrated with economic reforms and advanced simultaneously?
Is there the political will and the political consensus to implement the strategy?
Do the policy priorities fit the strategy?
The choice of policies to address
The sequence in which policies are implemented?
Has the strategy been communicated clearly to the stakeholders?
Is the private sector engaged?
Is government organized around the strategy?
Is there an overall coordinating structure for economic development?
Is the quality of governmental agencies and other institutions sufficient for effective implementation?
Are there mechanisms to measure progress and review / modify the strategy as prosperity improves or conditions change?

A nation’s most natural trade and investment partners are its neighbors
Proximity and similarity of needs allow trade and investment in more parts of the economy
Nations can grow in those areas where they have unique strengths

A nation’s economic growth and prosperity can be greatly enhanced by a healthy regional economy
Larger, accessible markets for local firms (exports and foreign investment)
Each nation becomes far more attractive as a place to invest

Nations will inevitably suffer if they are isolated or islands amid countries that are not prospering

A nation’s competitiveness can be greatly enhanced by regional coordination versus unilateral action

But:

National sovereignty remains important but competitiveness is often more readily achieved and sustained in moderately sized, competing economic units

Opens trade and investment among neighbors
Expands the available market for each country
The natural path of internationalization for local firms is the neighborhood
Open trade and investment make each country a more attractive location for investment
Drives improvements in the business environment
Captures synergies in policy and infrastructure
Harnesses improvements in clusters that cross borders
Gains greater clout in international negotiations
Helps overcome domestic political and economic barriers to reform

The region as a free trade zone or customs union	Countries unite into a “United States” of the region
Advantages Gains from internal trade and investment Economies of scale in performing some collective functions	Advantages Gains from internal trade and investment Economies of scale in performing some collective functions
Disadvantages Artificial trade diversion within the region due to asymmetric tariffs can lower productivity Regional trade blocs can increase protectionism vs. outside countries and slow multilateral market opening	Disadvantages Difficulty of achieving harmonization on divisive social issues Loss of local initiative, sovereignty, and control over economic destiny Achieving a “United States” often involves cross-subsidization that works against productivity

Traditional Model	Broader Model
Market Opening	Competitiveness Upgrading
Countries create free trade areas, customs unions, or common markets	Opening trade and investment is accomplished by regional cooperation on multiple dimensions of competitiveness

Factor (Input) Conditions	Context for Strategy and Rivalry	Demand Conditions	Related and Supporting Industries	Macroeconomic Competitiveness
Improving the efficiency of the regional transportation network Creating an efficient energy network Enhancing regional communications and connectivity Harmonizing administrative requirements for businesses Linking financial markets Facilitating the movement of students for higher education	Eliminating trade and investment barriers within the region Simplifying and harmonizing cross-border regulations and paperwork Opening up rivalry in each country Coordinating anti-monopoly and fair competition policies Harmonizing IP protection	Opening government procurement within the region Harmonizing environmental standards Harmonizing product quality, safety, and technical standards Establishing reciprocal consumer protection laws	Facilitating cross-border cluster development e.g., Supplier networks Efficient transport and logistics Quality standards	Coordinating macroeconomic policies Coordinating programs to improve security and public safety

Developing Countries	Advanced Countries
Illustrative Benefits	Illustrative Benefits
Inflow of skills and technology via FDI Access to international markets and distribution channels Exposure to sophisticated demand Competitive pressure to upgrade operational effectiveness	Access to larger market for services Efficient specialization along the value chain

Neighboring Countries

Wider Regions (e.g., Arab League)

World Community (e.g., WTO)

An overly broad set of countries
An overly broad agenda
Focus on politics versus economics; form versus substance
Bureaucratization and complexity
Lack of a concrete legal, funding, decision-making, and implementation structure
Lack of involvement by top national leaders
Weak political institutions at the national level
Foreign aid is traditionally organized by recipient country, creating challenges for cross-national programs
History of conflicts, in part because of the colonial legacy that defined borders cutting across ethnic and economic regions