The OECD Investment Compact for South East EuropeSupporting Investment Climate Reform for Growth and Employment

Vienna Economic Forum – 10 November 2008

Overview

1. Programme objective, organisation and Strategic

Framework

2. Activities and Achievements

3. Future strategy

Objectives

• Launched in 2000, the OECD Investment Compact for South East Europe is a regional programme designed to improve the investment climate and to encourage private sector development in South East Europe through the implementation of reforms to enhance domestic and foreign investment.

• Based in the OECD, the programme has its own institutional structure, including the South East Europe Investment Committee and an annual Ministerial conference.

Strategic Framework

Annual Ministerial for the SEE Region

Project on Sector Specific Sources of Competitiveness

Thematic Working Groups with policy recommendations

Country specific projects (ex: FDI Strategy in Moldova)

A. Enterprise and SME Development

4. Political Support

1. Monitoring and Evaluation

2. Implemen-tation Support

3. Private Sector Support

B. Policy and Promotion Specific to FDI

Investment Reform Index (IRI)

SME Policy Index

Focus of Investment Compact Program

4 A

reas

Structured Public/Private Debate through OECD tools

Involvement of Business Advisory Council, Regional Foreign Investors Councils and local chambers

Programme Structure

Investment Compact

Regional Office

Croatia

Regional Co-operation Council

Regional Co-operation Council

OECD Directorate for Financial and Enterprise Affairs

OECD Directorate for Financial and Enterprise Affairs

Investment Compact

for South East Europe

Investment Compact

for South East Europe

SEE Investment CommitteeSEE Investment Committee

Investment Compact

Regional Office

Moldova

OECD donor countries

SEE country economic

teams

Internationalorganisations

Private sector

Regional Working Groups:Anti-CorruptionHuman Capital

Investment PromotionRegulatory Reform

Co-chairs:

OECD Country + SEE Country + OECD

Financial contributors to the Investment Compact

• Austria (also co-chair of the initiative)• Belgium Flanders• Bulgaria• Central European Initiative (CEI)• Czech Republic• European Commission• Germany• Hungary• Ireland• Italy• Romania• Slovenia• United States

Overall achievements in the last seven years

• Enhanced the investment environment by:

– Accelerating reforms through identification of priorities and guidance on how to implement them

– Moving countries closer to OECD standards through adherence as observers to OECD Committees

– Improving brand image with sector specific investment promotion events

• Helped increase the capacity of policy makers and engagement of the private sector through the transfer of OECD methodologies, tools and instruments taking into account the specific circumstances of the region.

• Promoted a culture of continuous improvement with the systematic monitoring and evaluation of reforms based the Investment Reform Index and the SME Policy Index

• Encouraged regional ownership of the reform process with the launch of the South East Europe Investment Committee and regional thematic Working Groups to improve policy dialogue and implementation of investment reforms.

Summary of Achievements

Most recent achievement: Strengthening Sector Specific Sources of Competitiveness

The Western Balkans

Regional Study on Sector Competitiveness

Will translate into launch of an ambitious project to support implementation

See www.investmentcompact.org

Example of Findings: Business Process andTechnology Outsourcing (BPTO) advantages

Source: International Labour Organization; zdnetasia; Wall Street Journal, OECD interviews

Leveraging their competitive labour costs in servicesRelative comparison of average monthly labor cost in services (2005)

HungaryHungary PolandPoland CroatiaCroatia Bosnia&H

Bosnia&H

MontenegroMontenegro

SerbiaSerbia MoldovaMoldova IndiaIndia

Index(100:

Hungary)

Index(100:

Hungary)

(1)(1)

Sample of CEE countries WB countries covered by the project Other references

FYR Macedonia

FYR Macedonia

AlbaniaAlbania UNMIKUNMIK

Note: Monthly wages have been calculated on 2003-05 or 2003-06 average; using the LABORSTA Labour Statistics Database and covering, unless specified only the category J (financial intermediation) and K (business activities, real estate and renting). For Albania overall figures are based on category I (transport, storage and communications) due to the absence of statistics on J/K in the ILO databases

(1) average monthly wages in all services

Up to 5 timeslower

Example of findings: Sector specific gaps in Human Capital

Source: OECD RCS, OECD 2007

50% of BPO firms have difficulties finding skilled and educated workers

70% of BPO firms find education and training to be key policy issues

50%

Skills and education of available workersSkills and education of available workers Key issues within human capital policyKey issues within human capital policy

Investment Compact: Promoting Reforms for more and better invesment

Central Europe:

First Wave of FDI

SEE: Second wave of FDI

Eurasia:Third wave?

FDI in USD Million

Source: EBRD Transition report 2007, OECD Analysis

Programme focus 2009-2010

Ministerial planned to end 2009 in collaboration with Regional Cooperation Council

Regional Competitiveness Initiative (RCI)

Selected national business climate strategy projects

A. Enterprise and SME Development

4. Political Support

1. Monitoring and Evaluation

2. Implemen-tation Support

3. Private Sector Support

B. Policy and Promotion Specific to FDI

Investment Reform Index (IRI) 2009

SME Policy Index 2009

Collaboration with private sector around IRI 2009- Business Advisory Council (BAC)

- Foreign Investor Councils- Eurochambers and local chambers of commerce

Focus of Investment Compact Programme

4 A

reas

Collaboration with RCC

Collaboration with the RCC

•CEFTA 2006: the Investment Compact will assist in monitoring the three investment-related clauses of the CEFTA 2006 and incorporate them within the findings of the IRI 2009. Monitoring and evaluation of CEFTA 2006 may be expanded to include contributions by the CEFTA structures to the IRI’s Trade Policy and Administration dimension.

•Other policy dimensions: The RCC priority areas of Infrastructure, Human Capital Development and Justice and Home Affairs will benefit from the IRI evaluation and priority setting process within those dimensions. Strong involvement of the RCC will also enhance both the quality of IRI outputs and its impact on policy reform in SEE.

•Joint Ministerial end 2009: Take stock of achievements and define the roadmap going forward to improve regional competitiveness

Flagship project: Regional Competitiveness Initiative

SustainedCompetitiveness

Match supply and demand• Align ministries• Develop tools to analyse skills gaps and shortages• Review the labour market regime • Develop a mechanism for dialogue with civil society

Remove sector specific policy barriers on a continuous basis• Set-up regional sector specific working groups• Develop sector specific monitoring tools

Channel innovation efforts• Assess the success levels of current cluster initiatives• Develop an organisational structure and governance model at the national level• Map out the objectives and scope of competitive clusters to channel innovation efforts

Flagship project: IRI 2009

Expected Results

•An overview of each SEE country’s performance on business climate policy reform, allowing benchmarking relative to peers

•Jointly defined policy priorities to further improve the business climate

•Recommendations on how to make improvements within each policy dimension and concrete examples of OECD best practices

•Follow up support in implementation of reforms from both the OECD an other international organisations.

Policy Scope

1.Investment policy and promotino

2.Tax policy and administration

3.Trade policy

4.Anti-corruption

5.Financial sector development

6.Human Capital development

7.Infrastructure

8.SME policy

9.Regulatory reform and parliaments

Anthony O’Sullivan

Head of DivisionPrivate Sector Development Organisation for Economic Co-operation and Development (OECD)

anthony.osullivan@oecd.org

www.oecd.org

Contact

THANK YOU FOR YOUR ATTENTION!