National Economic Strategy

Tolerance of monopolies, cartels, protectionist regulations, and uncompetitive state-owned companies

Incentives or requirements to locate in free zones or export processing zones that are isolated by regulations from the local economy

Rigidity in vocational training and university curricula versus responding to cluster needs

Regional development policies that artificially spread companies and corporate investment across geography to benefit depressed regions

A legacy in some countries of the Soviet planned economy model of development which works against cluster formation and locational externalities

Economic Policy	Evidence
Increase capital investment	Aid does not increase capital investment; high rates of capital investment are neither necessary nor sufficient for prosperity growth.
Increase education spending	Higher rates of schooling or overall educational spending have no significant positive relationship with prosperity growth. Does not account for the quality of education.
Reduce population growth	Population growth has no significant relationship with prosperity growth.
Forgive foreign debts	Debt forgiveness has no positive effect on prosperity growth.

Improve the macroeconomic, political, legal, and social context

Establish a stable, predictable, and effective macroeconomic, legal, and political context
Improve the social conditions of citizens

Upgrade the general business environment

Improve the availability, quality, and efficiency of cross-cutting or general purpose inputs, infrastructure, and institutions
Set overall rules and incentives governing competition that encourage productivity growth

Facilitate cluster formation and upgrading

Lead a collaborative process of economic change

Develop an overall economic strategy together with key constituencies
Organize the parts of government in a coordinated development agenda
Engage multiple levels of government in economic development
Create institutions and processes for upgrading competitiveness that inform citizens and mobilize the private sector to take action

Factor-Driven Economy	Investment-Driven Economy	Innovation-Driven Economy
Cost of Inputs	Productivity	Unique Value
Macro, political, and legal stability and effectiveness Efficient basic infrastructure Lowering the regulatory costs of doing business	Local competition Market openness Advanced infrastructure Incentives and rules encouraging productivity Cluster formation and activation	Advanced skills Scientific and technological institutions Incentives and rules encouraging innovation Cluster upgrading

Government is not monolithic; competitiveness is affected by a myriad of government entities
Multiple agencies and departments (e.g., finance, trade, education, science and technology, commerce, regional policy, energy, agriculture) have an influence on competitiveness
“Economic” agencies and “social” agencies both influence competitiveness
Multiple levels of government affect competitiveness (nations, states, cities, etc.)
Intergovernmental relations with neighboring countries affect competitiveness
Competitiveness is rarely the sole agenda of a single government agency, but cuts across many agencies
A coordinating structure is needed (e.g., “competitiveness policy council”) that brings together the ministers and department heads necessary to formulate and implement an economic strategy

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?