To relocate or not to relocate
Hans Martens
Chief Executive
European Policy Centre
What drives relocation?
What is competitiveness?
What are the factors behind
competitiveness and thus relocation?
Economic growth scoreboard
Afghanistan
Turkmenistan
Equatorial Guinea
Chad
Isle of Man
Azerbaijan
Liechtenstein
Faeroe Islands
Armenia
Ukraine
Kazakhstan
China
Lithuania
Argentina
8.7%
CIA World Fact Book
29.0%
23.1%
20.0%
15.0%
13.5%
11.2%
11.0%
10.0%
9.9%
9.4%
9.2%
9.1%
9.0%
Qatar
India
Bhutan
San Marino
Algeria
Latvia
Russia
Botswana
Vietnam
Cook Islands
Nigeria
Albania
Tajikistan
Mozambique
8.5%
8.3%
7.7%
7.5%
7.4%
7.4%
7.3%
7.2%
7.2%
7.1%
7.1%
7.0%
7.0%
7.0%
World Economic Forum scoreboard 2005
GLOBAL:
EU:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Finland
USA
Sweden
Denmark
Taiwan
Singapore
Iceland
Switzerland
Norway
Australia
Netherlands
Japan
UK
Canada
Germany
Finland
Sweden
Denmark
Netherlands
UK
Germany
Estonia
Austria
Portugal
Luxembourg
Ireland
Spain
France
Belgium
Slovenia
16. Cyprus
17. Malta
18. Czech Republic
19. Hungary
20. Slovakia
21. Lithuania
22. Latvia
23. Greece
24. Italy
25. Poland
Based on broad concept.
Results very similar to
Lisbon benchmarking
Positive and negative effects
Globalisation/relocation gives:
Development of recipient economies
More efficient resource allocation
Cheaper prices
New markets
and
Threats to jobs, but is that a transition or a permanent situation?
Demonstrates of strengths of economic and social model
Globalisation and relocation demands agility
The response must be an ability to change at all levels and to
turn threats into opportunities
Social systems should underpin this and protect the individual, not the
jobs
In turn for flexibility the workforce should be given opportunities for
learning and finding new (and better) jobs
There is a European Economic and Social Model
and it is characterised by large public sector, focus on welfare state
and emphasis on the environment.
Japan: 26%
Taxes as % of GDP:
USA: 25%
China: 16%
EU-15: 40 -55%
India: 17%
European Economic and Social sub models
Anglo-Saxon
Similarities: Hands-off
approach to markets
Differences: Size of
welfare state
Northern
Similarities: Large
welfare sector
Differences: Approach to
market
Nordic model combines a liberal
approach to markets with high
quality welfare sector and provides
‘flexicurity’
Continental
Product market regulation 2003
3
2,5
2
1,5
1
0,5
0
UK Ire Den Swe Lux Fin Bel Net Aus Slvk Ger Por Spa Fra CR Gre
OECD Overall Product Market Regulation Indicator
Ita Hun Pol
State Control 2003
4
3,5
3
2,5
2
1,5
1
0,5
0
Den Slvk UK Swe Net Aus
Ire Lux Ger
OECD Product Market Regulation Indicators
Fin
Bel CR Fra
Spa Por Gre
Ita
Hun Pol
Barriers to Entrepreneurship
2,5
2
1,5
1
0,5
0
Ire Swe
Fin Slvk Lux Den Por
OECD Product Market Regulation Indicators
Ita
Hun Ger Gre Spa
Fra
Bel Aus Net
CR
Pol
Attitudes towards globalisation in Europe
Fra
Pol
Ita
Spa
CR
Bel
Ger
UK
Fin
Swe
Ire
Net
Den
0
1
2
Source: IMD survey 2004. Index 0-10.
3
4
5
6
7
8
The Polish Plumber
I stay in Poland.
Do come over in numbers.
Does a big state prevent competitiveness?
Apparently not. This issue is not quantity but quality.
Public sector and competitiveness
WEF score
6
Fin
Swe
Den
UK
Spa
5
Ger
Bel
Fra
Ita
4
Tax of GDP
30%
40%
50%
From the industrial society to today
IT
Manufacturing
R&D
Factors driving relocation
Lower wages:
Only if productivity is matching
Other factors: Skills of available workforce
The case of the new member states
Factors driving relocation
Depends on for what purpose:
•Wages
•Workforce skills
•Taxes
•Logistics
•Market
•Clusters – natural strengths
•Quality of public sector and legal system
The International
firm
Global
The National
firm
The local/niche
firm
Good Bye
Opportunities,
but constant
adjustment
needed