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Competitiveness and the State of Entrepreneurship
                       in Saudi Arabia


                                                                                                           Professor Michael E. Porter
                                                                                                             Harvard Business School

                                                                                                                                 January 27, 2009
           This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990),
           “Towards a New Global Competitiveness Index,” in The Global Competitiveness Report 2008 (World Economic Forum, 2008), with S. Stern, M. Delgado, C.
           Ketels, “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998), and
           ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or
           by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter.
           Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu
           Version: January 24, 2009, 3pm
20090126 – Saudi Arabia.ppt                                                             1                                                          Copyright 2009 © Professor Michael E. Porter
State of Saudi Arabian Competitiveness



       •  Assessing the competitive position of Saudi Arabia in 2009
                    –  Progress over the last year


       •  Defining the strategic agenda

       •  Igniting entrepreneurship and SME development




20090126 – Saudi Arabia.ppt                          2                 Copyright 2009 © Professor Michael E. Porter
Competitiveness and the Global Crisis



       •  Governments all over the world are focused on short-term crisis
          management




       •  Short-term actions will be most effective if they are tied to long-term
          competitiveness improvements


       •  The crisis offers an opportunity for making changes that are difficult
          during normal times



20090126 – Saudi Arabia.ppt                    3                         Copyright 2009 © Professor Michael E. Porter
Prosperity Performance
                                                                  Selected Countries
PPP-adjusted GDP per
    Capita, 2007

                                            Norway         Qatar ($73,079)


                                               USA
                                                                                       Ireland
                                               Kuwait                Hong Kong
                                                    Canada                           Singapore
                               Switzerland                      Iceland
                                     Netherlands        Australia
                                           Austria              Sweden
                                                     UK              Finland
                                    Germany                                  Taiwan
                                       Japan     France
                                             Italy                        Bahrain
                                                        Spain                 Greece
                              UAE                                                   Slovenia
                                  New Zealand              Israel
                                         Saudi Arabia           Czech Republic              South Korea
                                           Portugal          Oman
                                                                                                                                  Estonia
                                                                              Hungary              Slovakia
                                                                                                                  Lithuania                           Latvia
                                                                                         Poland
                                                                                         Croatia                         Russia
                                   Argentina              Chile           Malaysia
                                                        Mexico
                                          Brazil        South Africa    Costa Rica                      Romania
                               Lebanon
                                                          Turkey
                                                                                    Thailand
                                        Colombia                       Tunisia
                                                                     Egypt                                                                            China
                               Syria                       Jordan        Indonesia        Sri Lanka
                                                         Philippines       Pakistan               India       Vietnam
                                       Yemen                 Nigeria                                                                 Cambodia
                                                                                Bangladesh



                                                     Growth of Real GDP per Capita (PPP-adjusted), CAGR, 1998-2007
Source: EIU (2008), authors calculations
20090126 – Saudi Arabia.ppt                                                          4                                              Copyright 2009 © Professor Michael E. Porter
What is Competitiveness?

 •  Competitiveness depends on the productivity with which a nation uses
    its human, capital, and natural resources.
             –  Productivity sets the standard of living (wages, returns on capital, returns
                on natural resources) that a country can sustain
             –  It is not what industries a nation competes in that matters for prosperity, but
                how productively it competes in those industries
             –  Productivity in a national economy depends on a combination of domestic
                and foreign firms
             –  The productivity of “local” or domestic industries is fundamental to
                competitiveness, not just that of export industries



•  Nations compete to offer the most productive environment for business
•  The public and private sectors play different but interrelated roles in
   creating a productive economy

20090126 – Saudi Arabia.ppt                         5                               Copyright 2009 © Professor Michael E. Porter
Comparative Labor Productivity
GDP per employee (PPP                                        Selected Countries
  adjusted US$), 2007

                                           Qatar ($122,262)                                                               CAGR 2002-2007
                                            Norway                                                                        Average rate 2001- 2006
                                                     USA
                                           Ireland

                                    France          Austria              Hong Kong
                                      Kuwait      UK Finland
                           Canada                           Sweden
                                     Australia
                         Italy                Germany              Singapore
                                Switzerland           Japan
                Spain
                                  Saudi Arabia                 Bahrain
                   Saudi Arabia
                                                      Oman
                                                                     Slovenia
                         New Zealand                   South Korea
                                              UAE                                                        Slovakia
                                                                     Hungary
                                                                                               Czech Republic
                                                                                                                Estonia
                                                                         Poland                 Lithuania
                                                                                                                      Latvia
                                  Chile                                  Malaysia              Argentina
                                                  Mexico
                                                                                           Russia     Turkey
                                 Iran
                                                                     South Africa
                        Brazil
                                          Egypt
              Iraq (-6.3%)                                Jordan         Thailand
                            Syria                     Sri Lanka
                                                             Philippines   Indonesia                                                     China
                          Yemen Pakistan                                                                    India
                                                                                  Vietnam
                                                                    Cambodia


                          Compound annual growth rate (CAGR) of real GDP per employee (PPP-adjusted), 2002-2007
Note: In some cases 2006 data used where 2007 data unavailable.
Source:– authors calculation, EIU (2009), Groningen Growth and Development Centre (2009)
20090126 Saudi Arabia.ppt                                                          6                                            Copyright 2009 © Professor Michael E. Porter
Labor Force Mobilization
                                                            Selected Countries
 Employees as % of
Total Population, 2007




                                                                                                               OECD average: 0.48




Note: Use most recent year available, either 2007 or 2006
Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, April 2008
20090126 – Saudi Arabia.ppt                                                   7                                   Copyright 2009 © Professor Michael E. Porter
Fixed Investment Rates
 Gross Fixed Investment                                    Selected Countries
   as % of GDP (2007)

                                                          China (40.4%)                             Qatar (44.8%)        Latvia
                                                                                                        India

                                         Vietnam


                                                                            Spain
                                                                Croatia

                              South Korea                          Slovenia         Sri Lanka               Iceland
                              Iran                               Slovakia                         Jordan
                                                    Australia
                                                                      Thailand
                                                                                                              Colombia
                                            Singapore               Yemen             Indonesia
                            Czech                               Ireland
                          Republic           Tunisia                                                       Argentina
                                              Japan                Denmark
                                                  New Zealand
                                     Malaysia     Canada       Lebanon
                                  Syria                          Kuwait Egypt Pakistan
                                   UAE            France     Russia          Turkey
                                Hong Kong Chile Norway Finland          Oman
                                     Saudi Arabia            Sweden
                                                      Israel
                                          Germany    UK       Brazil
                          Bahrain


                                                    USA
                                     Philippines

                                            Change in Gross Fixed Investment (as % of GDP), 2003 - 2007
Source: EIU, 2007.
20090126 – Saudi Arabia.ppt                                                 8                                              Copyright 2009 © Professor Michael E. Porter
Foreign Direct Investment Flows
    FDI Flow
                                                   Saudi Arabia
  (millions USD)




Source: World Investment Report, 2008
20090126 – Saudi Arabia.ppt                             9                  Copyright 2009 © Professor Michael E. Porter
Saudi Arabia’s Export Share Trends
 World Export Share               By Type of Product, 1991-2006
   (current USD)




Source: UNComTrade, WTO (2008)
20090126 – Saudi Arabia.ppt                    10                  Copyright 2009 © Professor Michael E. Porter
Innovative Capacity
                                   Innovation Output, Selected Countries
 Average U.S. patents per 1
million population, 2003-2007


                                                                 Hong Kong
                                     Ireland




                               South Africa
                            Turkey          Spain
                        Brazil
                     Mexico                       Kuwait                                                             Malaysia
                  Argentina                                                               Egypt           China
                                                  Russia                 India
                Thailand                               Saudi Arabia              Poland           Chile



                                               CAGR of US-registered patents, 2003 – 2007                    525 patents =
Source: USPTO (2008), EIU (2008)
20090126 – Saudi Arabia.ppt                                      11                                           Copyright 2009 © Professor Michael E. Porter
Determinants of Competitiveness
                                                Microeconomic Competitiveness

                              Quality of the                                         Sophistication
                                National                    State of Cluster          of Company
                                Business                     Development             Operations and
                              Environment                                               Strategy



                                                Macroeconomic Competitiveness

                                                    Social
                                               Infrastructure             Macroeconomic
                                                and Political                Policies
                                                 Institutions




                                                            Endowments


    •  Macroeconomic competitiveness creates the potential for high productivity, but is
       not sufficient
    •  Productivity ultimately depends on improving the microeconomic capability of
       the economy and the sophistication of local competition
20090126 – Saudi Arabia.ppt                                         12                                Copyright 2009 © Professor Michael E. Porter
Macroeconomic Competitiveness

                      Social Infrastructure and                                         Macroeconomic
                        Political Institutions                                             Policies
          •  Basic human capacity                                            •  Fiscal policy
                       –  Basic education                                         –  Government surplus/deficit
                       –  Health system                                           –  Government debt


                                                                             •  Monetary policy
          •  Political institutions                                               –  Inflation
                       –      Political freedom                                   –  Interest rate spread
                       –      Voice and accountability
                       –      Political stability
                       –      Government effectiveness
                       –      Centralization of economic policymaking

          •  Rule of law
                       –      Judicial independence
                       –      Efficiency of legal framework
                       –      Business costs of corruption
                       –      Civil rights




20090126 – Saudi Arabia.ppt                                             13                                        Copyright 2009 © Professor Michael E. Porter
Microeconomic Competitiveness: Quality of the
                                    Business Environment
                                                                Context for
                                                                   Firm
                                                                 Strategy
                                                                and Rivalry

                                                   Localrules and incentives that
                                                    encourage investment and
                                                    productivity
                                Factor                 –  e.g. performance based salaries,
                                                          incentives for capital                 Demand
                                (Input)
                                                          investments, intellectual property     Conditions
                               Conditions                 protection
                                                   Vigorous   local competition
        Access  to high quality                                                                Sophistication  of local
                                                       –  Openness to foreign and local
           business inputs                                competition                           customers and needs
              – Natural endowments                                                                – Strict quality, safety, and
              – Human resources                                 Related and                         environmental standards
              – Capital availability                            Supporting
              – Physical infrastructure                          Industries
              – Administrative infrastructure
                (e.g. registration, permitting)      Availability
                                                               of suppliers and
              – Scientific and technological          supporting industries
                infrastructure
              – Information and transparency
                infrastructure
        •  Many things matter for competitiveness
        •  Successful economic development is a process of successive upgrading, in which the business
           environment improves to enable increasingly sophisticated ways of competing
20090126 – Saudi Arabia.ppt                                            14                                      Copyright 2009 © Professor Michael E. Porter
Microeconomic Competitiveness: Cluster Development
                                                Huston Oil and Gas Cluster
                              Upstream                                                                Downstream

                                                                            Oil                                                    Oil                  Oil
                                                                                                                   Oil
             Oil & Natural               Oil & Natural                    Trans-          Oil         Oil
                                                                                                               Distribution
                                                                                                                                Wholesale             Retail
                                                                         portation      Trading     Refining
                                              Gas                                                                                                    Marketing
                  Gas                                                                                                           Marketing

             Exploration &               Completion &                                                              Gas
                                                                           Gas            Gas        Gas                            Gas               Gas
             Development                  Production                     Gathering     Processing   Trading
                                                                                                                Transmis-
                                                                                                                                Distribution        Marketing
                                                                                                                   sion




           Oilfield Services/Engineering & Contracting Firms



                                            Specialized
          Equipment                         Technology                               Subcontractors                                     Business
          Suppliers                          Services                                                                                   Services

 (e.g. Oil Field Chemicals,           (e.g. Drilling Consultants,                   (e.g. Surveying,                             (e.g. MIS Services,
        Drilling Rigs,                   Reservoir Services,                         Mud Logging,                               Technology Licenses,
         Drill Tools)                    Laboratory Analysis)                    Maintenance Services)                           Risk Management)




                                                         Specialized Institutions
                               (e.g. Academic Institutions, Training Centers, Industry Associations)
20090126 – Saudi Arabia.ppt                                         15                                                        Copyright 2009 © Professor Michael E. Porter
Saudi Arabia’s Competitiveness
                                      Progress on the Competitiveness Index



                                                                                                                             2007                  2008
      Estimated Ranking:
      New Global Competitiveness Index                                                                                           41                    36

                              Macroeconomic Competitiveness                                                                       32                    35

                              Microeconomic Competitiveness                                                                       53                    36



      GDP Per Capita Rank (ppp-adjusted)                                                                                           36                   36



Note:
 Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness.
Source:
 Institute for Strategy and Competitiveness, Harvard University (2009)
20090126 – Saudi Arabia.ppt                                                      16                                                       Copyright 2009 © Professor Michael E. Porter
Saudi Arabia’s Position
                                             Macroeconomic Competitiveness



                                                                                                                             2007                  2008

      Estimated Macroeconomic Competitiveness Index                                                                              32                    35

                              Social Infrastructure and
                                      Political Institutions                                                                    48                      41

                              Macroeconomic Policy                                                                              20                      27




Note:
 Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness.
Source:
 Institute for Strategy and Competitiveness, Harvard University (2009)
20090126 – Saudi Arabia.ppt                                                      17                                                       Copyright 2009 © Professor Michael E. Porter
Saudi Arabia’s Position
                                             Microeconomic Competitiveness



                                                                                                                             2007                  2008

      Estimated Microeconomic Competitiveness Index                                                                              53                    36

                              National Business Environment                                                                     53                      35

                              Company Operations and Strategy                                                                   54                      38




Note:
 Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness.
Source:
 Institute for Strategy and Competitiveness, Harvard University (2009)
20090126 – Saudi Arabia.ppt                                                      18                                                       Copyright 2009 © Professor Michael E. Porter
Macroeconomic Competitiveness:
                                        Saudi Arabia

                                   Social
                              Infrastructure                            Macroeconomic
                               and Political                               Policies
                                Institutions


       •  Social policies have addressed poverty           •  Saudi Arabian macroeconomic polices
          and basic social needs, but basic                   are generally sound, but transparency
          education and health remain                         remains limited
          weaknesses

       •  Political institutions are improving, but        •  The budget is exposed to swings in oil
          the predictability and transparency of              revenues, which leads to pro-cyclical
          reform is limited                                   fiscal policies

       •  The Saudi legal system is improving, but         •  Inflation has risen, exposing weaknesses
          fundamental reform is necessary                     in monetary policy




20090126 – Saudi Arabia.ppt                           19                                 Copyright 2009 © Professor Michael E. Porter
Saudi Arabia Competitiveness
                                                   Strengths




Note:
 Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness.
Source:
 Institute for Strategy and Competitiveness, Harvard University (2009)
20090126 – Saudi Arabia.ppt                                                      20                                                       Copyright 2009 © Professor Michael E. Porter
Ease of Doing Business
 Ranking, 2008
 (of 181 countries)
                                                                        Saudi Arabia
                                 Favorable                                                                    Unfavorable



                                                                               Median Ranking,
                                                                               OECD




                    Saudi Arabia per capita GDP rank: 32



                   Saudi Arabia Doing Business rank: 16
                    Saudi Arabia 2010 goal: 10




2007 Rank
 (Change)
          24 (+8)                 3 (+2)         6 (-1)    33 (+17) 49 (+25) 38 (+10) 44 (-1)    48 (-2) 82 (+25) 51 (-8)        136 (-1)

Source: World Bank Report, Doing Business (2008)
 20090126 – Saudi Arabia.ppt                                                  21                                      Copyright 2009 © Professor Michael E. Porter
National Cluster Export Portfolio
                                                                                       Saudi Arabia, 1998-2006
                                                                                                                                                               Oil and Gas
                                                                                                                                                              (1.19%, 13.7%)
                                                                                                                                                               $189,356,469
                                                 Saudi Arabia’s Average
                                                 World Export Share: 1.67%
Saudi Arabia’s world export market share, 2006




                                                                                                                                            Plastics




                                                                     Business Services
                                                                                                     Chemical Products




                                                         Prefabricated Enclosures and Structures
                                                                                                                 Processed Foods
                                                              Construction Materials

                                                                     Agricultural Products                      Jewelry, Precious Metals and Collectibles

                                                 Metal Mining and Manufacturing               Forest Products
                                                                                                                                           Change In Saudi Arabia’s Overall
                                                                                                                                              World Export Share: +0.95%



                                                                   Change in Saudi Arabia’s world export market share, 1998-2006                            Exports of US$1.1 Billion =
     Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business
     School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics.
     20090126 – Saudi Arabia.ppt                                                                         22                                                         Copyright 2009 © Professor Michael E. Porter
Share of World Export’s by Cluster
        < 0.41%                                                       Saudi Arabia, 2006
        0.41 – 0.84%
                                      Fishing &                                                                                        Textiles
        0.84 – 1.67%                   Fishing                                           Entertainment
                                                                                                           Prefabricated
                                      Products                          Hospitality
                                                                                                            Enclosures
        1.67 – 3.34%                                                    & Tourism
                                                  Agricultural
        > 3.34%                                    Products
                                                                                                                           Furniture
Saudi Arabia’s                                               Transportation                                    Building
Average World                   Distribution                  & Logistics        Aerospace                    Fixtures,                   Construction
Export Share:                    Services                                        Vehicles &                  Equipment &                    Materials
1.67%
                                                                     Information Defense                      Services
                                                                        Tech.                                                 Heavy                              Processed
                                           Business                                                 Lightning &                                                    Food
         Jewelry &                                                                                                          Construction
                                           Services                                    Analytical    Electrical
         Precious                                                                                                            Services
                                                          Education &                 Instruments    Equipment
          Metals                                                                                                                              Forest
                                                          Knowledge                                             Power
                                                                            Medical                                                          Products
                                                           Creation                                           Generation
                               Financial                                    Devices            Communi-
                               Services                                                         cations
                                               Publishing
                                               & Printing          Biopharma-                  Equipment
                                                                                                                               Heavy
                                                                    ceuticals                                                 Machinery
                                                                                                           Motor Driven                     Production
                                                             Chemical                                       Products                       Technology
                   Apparel
                                                             Products             Tobacco
                               Leather &             Oil &                                                                                                Automotive
                                Related              Gas                                                              Aerospace   Metal
                               Products                          Plastics                                              Engines Manufacturing


         Footwear
                                                                                                                               Sporting              Marine
                                                                                                                             & Recreation           Equipment
                                                                                                                                Goods
Note: Clusters with overlapping borders have at least 20% overlap (by number of industries) in both directions.
 20090126 – Saudi Arabia.ppt                                                              23                                                Copyright 2009 © Professor Michael E. Porter
Saudi Arabian Business Environment
                                         Progress in 2008


       •  Significant efforts underway to improve the education system, especially
          universities


       •  Recent reforms in the financial sector, but high volatility of the domestic
          market is a sign of immaturity


       •  Improvements in business regulations, but much remains to be done


       •  Improved availability of ICT


       •  Some progress on encouraging larger presence of foreign companies in the
          Saudi economy


       •  Some progress on cluster development, especially in areas related to oil and
          gas

20090126 – Saudi Arabia.ppt                     24                             Copyright 2009 © Professor Michael E. Porter
Saudi Arabian Competitiveness
                                                               Selected Weaknesses




Note:
 Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness.
20090126 – Saudi Arabia.ppt Strategy and Competitiveness, Harvard University (2009)
Source:
 Institute for                                                              25                                                    Copyright 2009 © Professor Michael E. Porter
Towards a Saudi Arabian Competitiveness Agenda
       •  Continue efforts on educational reform, including a stronger push on
          workforce development
       •  Make efficient capital provision to the private sector the central goal
          of financial market development
       •  Modernize corporate governance and reporting practices,
          especially in GLCs
       •  Shift the focus of business regulatory reform from discrete process
          improvements to improving the overall regulatory experience
       •  Use FDI attraction and the promotion of new business formation to
          challenge legacy market structures with little competitive pressure
       •  Create a comprehensive cluster development program to drive
          deeper competitiveness improvement and provide the structure for
          economic diversification




20090126 – Saudi Arabia.ppt                26                         Copyright 2009 © Professor Michael E. Porter
Clusters and Economic Policy

                                     Business Attraction              Education and Workforce Training

                                                                               Science and Technology
                                                                               Investments
                              Export Promotion                                 (e.g., centers, university
                                                                               departments, technology
                                                                               transfer)
                                                           Clusters
                     Market Information                                          Standard setting
                     and Disclosure


                               Specialized Physical                         Environmental Stewardship
                               Infrastructure
                                                  Natural Resource Protection




     •  Clusters provide a framework for organizing the implementation of public
        policy and public investments towards economic development
20090126 – Saudi Arabia.ppt                                   27                             Copyright 2009 © Professor Michael E. Porter
Towards a Saudi Arabian Competitiveness Agenda
       •  Continue efforts on educational reform, including a stronger push on
          workforce development
       •  Make efficient capital provision to the private sector the central goal
          of financial market development
       •  Modernize corporate governance and reporting practices,
          especially in GLCs
       •  Shift the focus of business regulatory reform from discrete process
          improvements to improving the overall regulatory experience
       •  Use FDI attraction and the promotion of new business formation to
          challenge legacy market structures with little competitive pressure
       •  Create a comprehensive cluster development program to drive
          deeper competitiveness improvement and create the structure for
          economic diversification




20090126 – Saudi Arabia.ppt                28                         Copyright 2009 © Professor Michael E. Porter
Clusters and Economic Diversification
                    Upgrade the Quality and
                                                                  Upgrade Local Industries /
                  Efficiency of Existing Export
                                                                          Clusters
                     Products and Services




                  Broaden Existing Clusters,                                 Build Clusters Around Strong
               (Including Resources Clusters)                                            MNCs




                                                  Develop Related Clusters




               Invest in Enabling Conditions                               Build Positions in Clusters that
               Where the Country Has Cluster                                 are Strong in Neighboring
                   Specific Advantages                                                 Regions


20090126 – Saudi Arabia.ppt                                  29                                 Copyright 2009 © Professor Michael E. Porter
Towards a Saudi Arabian Competitiveness Agenda
       •  Continue efforts on educational reform, including a stronger push on
          workforce development
       •  Make efficient capital provision to the private sector the central goal
          of financial market development
       •  Modernize corporate governance and reporting practices,
          especially in GLCs
       •  Shift the focus of business regulatory reform from discrete process
          improvements to improving the overall regulatory experience
       •  Use FDI attraction and the promotion of new business formation to
          challenge legacy market structures with little competitive pressure
       •  Create a comprehensive cluster development program to drive
          deeper competitiveness improvement and create the structure for
          economic diversification
       •  Unleash entrepreneurship and SME development




20090126 – Saudi Arabia.ppt                30                         Copyright 2009 © Professor Michael E. Porter
Emerging Companies and Competitiveness

       Emerging companies:

                   •  are a crucial driver of competitiveness improvement

                   •  create most of the new jobs in advanced economies

                   •  increase the intensity of competition

                   •  are the backbone of clusters




       Creating a culture of entrepreneurship in Saudi Arabia is a crucial
         priority


20090126 – Saudi Arabia.ppt                          31                     Copyright 2009 © Professor Michael E. Porter
Entrepreneurship in Saudi Arabia
                                       The Opportunity

       •  Large, youthful and growing population

       •  Growing markets with many undefended niches

       •  Stable economy with a prudent investment posture

       •  Modest income taxes

       •  Large and sustained government investments in the economy

       •  Increasing foreign interest in investing in the Middle East

       •  Emerging venture capital industry

       •  Opportunity to serve the entire region
20090126 – Saudi Arabia.ppt                  32                         Copyright 2009 © Professor Michael E. Porter
Entrepreneurship in Saudi Arabia
                                                    Constraints

        Culture
        •  Absence of an entrepreneurial culture
        Skills
        •  Lack of a skilled Saudi workforce
        •  Absence of general and industry specific training programs for employees
        Regulatory Processes
        •  Still cumbersome government regulation, red tape, and user experience
        Infrastructure for Entrepreneurship
        •  Lack of program and supporting institutions for start-up and emerging
           companies
                    –  e.g, incubators, technical assistance, and entrepreneur networks
        •  Lack of public visibility and media coverage of emerging companies
        Cluster Development
        •  Lack of supplier development programs at large companies
        •  Absence of cluster collaboration organizations providing support to SMEs

20090126 – Saudi Arabia.ppt                                33                             Copyright 2009 © Professor Michael E. Porter
The Saudi Fast Growth 100

       Fast Growth Companies                  45
       •  5 years and older
       •  Minimum of 4 million SAR (largest 3 billion SAR)
       •  40% compound annual growth rate
       •  Created 15,000 jobs in the past 5 years
       Winners are ranked according to their revenue growth and each company
          goes through a rigorous qualification process.

       Fast Growth Start Up Companies        27
       •  Less than 5 years old
       •  198% average growth from 2006 to 2007
       •  Minimum of 2 million SAR (largest 1.3 billion SAR)

       Fast Growth Companies to Watch           23
       •  Up and coming.
20090126 – Saudi Arabia.ppt                34                     Copyright 2009 © Professor Michael E. Porter
Saudi Fast Growth Companies
                                     Facts & Figures
       •  Average entrepreneurial age at founding 32 years

       •  There are 8 women founders

       •  Winners are 100% college graduates, half with master’s degrees

       •  More than half have founded more than one company

       •  About 25% plan to go public

       •  80% plan to launch another business in the next 2 years

       •  Most common industries:      High Tech & Telecom                            23%
                                       Construction & Engineering                     12%
                                       Health & Education                             10%
20090126 – Saudi Arabia.ppt
                                       Management Consulting
                                            35
                                                                                      10%
                                                                    Copyright 2009 © Professor Michael E. Porter
Towards a Saudi Arabian Competitiveness Agenda
       •  Continue efforts on educational reform, including a stronger push on
          workforce development
       •  Make efficient capital provision to the private sector the central goal
          of financial market development
       •  Modernize corporate governance and reporting practices,
          especially in GLCs
       •  Shift the focus of business regulatory reform from discrete process
          improvements to improving the overall regulatory experience
       •  Use FDI attraction and the promotion of new business formation to
          challenge legacy market structures with little competitive pressure
       •  Create a comprehensive cluster development program to drive
          deeper competitiveness improvement and create the structure for
          economic diversification
       •  Unleash entrepreneurship and SME development



       •  Move from 10 by 10 to a broader competitiveness strategy
20090126 – Saudi Arabia.ppt                36                         Copyright 2009 © Professor Michael E. Porter

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(GCF2009) Professor Michael E. Porter- "Competitiveness and the State of Entrepreneurship"

  • 1. Competitiveness and the State of Entrepreneurship in Saudi Arabia Professor Michael E. Porter Harvard Business School January 27, 2009 This presentation draws on ideas from Professor Porter’s articles and books, in particular, The Competitive Advantage of Nations (The Free Press, 1990), “Towards a New Global Competitiveness Index,” in The Global Competitiveness Report 2008 (World Economic Forum, 2008), with S. Stern, M. Delgado, C. Ketels, “Clusters and the New Competitive Agenda for Companies and Governments” in On Competition (Harvard Business School Press, 1998), and ongoing research on clusters and competitiveness. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means - electronic, mechanical, photocopying, recording, or otherwise - without the permission of Michael E. Porter. Further information on Professor Porter’s work and the Institute for Strategy and Competitiveness is available at www.isc.hbs.edu Version: January 24, 2009, 3pm 20090126 – Saudi Arabia.ppt 1 Copyright 2009 © Professor Michael E. Porter
  • 2. State of Saudi Arabian Competitiveness •  Assessing the competitive position of Saudi Arabia in 2009 –  Progress over the last year •  Defining the strategic agenda •  Igniting entrepreneurship and SME development 20090126 – Saudi Arabia.ppt 2 Copyright 2009 © Professor Michael E. Porter
  • 3. Competitiveness and the Global Crisis •  Governments all over the world are focused on short-term crisis management •  Short-term actions will be most effective if they are tied to long-term competitiveness improvements •  The crisis offers an opportunity for making changes that are difficult during normal times 20090126 – Saudi Arabia.ppt 3 Copyright 2009 © Professor Michael E. Porter
  • 4. Prosperity Performance Selected Countries PPP-adjusted GDP per Capita, 2007 Norway Qatar ($73,079) USA Ireland Kuwait Hong Kong Canada Singapore Switzerland Iceland Netherlands Australia Austria Sweden UK Finland Germany Taiwan Japan France Italy Bahrain Spain Greece UAE Slovenia New Zealand Israel Saudi Arabia Czech Republic South Korea Portugal Oman Estonia Hungary Slovakia Lithuania Latvia Poland Croatia Russia Argentina Chile Malaysia Mexico Brazil South Africa Costa Rica Romania Lebanon Turkey Thailand Colombia Tunisia Egypt China Syria Jordan Indonesia Sri Lanka Philippines Pakistan India Vietnam Yemen Nigeria Cambodia Bangladesh Growth of Real GDP per Capita (PPP-adjusted), CAGR, 1998-2007 Source: EIU (2008), authors calculations 20090126 – Saudi Arabia.ppt 4 Copyright 2009 © Professor Michael E. Porter
  • 5. What is Competitiveness? •  Competitiveness depends on the productivity with which a nation uses its human, capital, and natural resources. –  Productivity sets the standard of living (wages, returns on capital, returns on natural resources) that a country can sustain –  It is not what industries a nation competes in that matters for prosperity, but how productively it competes in those industries –  Productivity in a national economy depends on a combination of domestic and foreign firms –  The productivity of “local” or domestic industries is fundamental to competitiveness, not just that of export industries •  Nations compete to offer the most productive environment for business •  The public and private sectors play different but interrelated roles in creating a productive economy 20090126 – Saudi Arabia.ppt 5 Copyright 2009 © Professor Michael E. Porter
  • 6. Comparative Labor Productivity GDP per employee (PPP Selected Countries adjusted US$), 2007 Qatar ($122,262) CAGR 2002-2007 Norway Average rate 2001- 2006 USA Ireland France Austria Hong Kong Kuwait UK Finland Canada Sweden Australia Italy Germany Singapore Switzerland Japan Spain Saudi Arabia Bahrain Saudi Arabia Oman Slovenia New Zealand South Korea UAE Slovakia Hungary Czech Republic Estonia Poland Lithuania Latvia Chile Malaysia Argentina Mexico Russia Turkey Iran South Africa Brazil Egypt Iraq (-6.3%) Jordan Thailand Syria Sri Lanka Philippines Indonesia China Yemen Pakistan India Vietnam Cambodia Compound annual growth rate (CAGR) of real GDP per employee (PPP-adjusted), 2002-2007 Note: In some cases 2006 data used where 2007 data unavailable. Source:– authors calculation, EIU (2009), Groningen Growth and Development Centre (2009) 20090126 Saudi Arabia.ppt 6 Copyright 2009 © Professor Michael E. Porter
  • 7. Labor Force Mobilization Selected Countries Employees as % of Total Population, 2007 OECD average: 0.48 Note: Use most recent year available, either 2007 or 2006 Source: The Conference Board and Groningen Growth and Development Centre, Total Economy Database, April 2008 20090126 – Saudi Arabia.ppt 7 Copyright 2009 © Professor Michael E. Porter
  • 8. Fixed Investment Rates Gross Fixed Investment Selected Countries as % of GDP (2007) China (40.4%) Qatar (44.8%) Latvia India Vietnam Spain Croatia South Korea Slovenia Sri Lanka Iceland Iran Slovakia Jordan Australia Thailand Colombia Singapore Yemen Indonesia Czech Ireland Republic Tunisia Argentina Japan Denmark New Zealand Malaysia Canada Lebanon Syria Kuwait Egypt Pakistan UAE France Russia Turkey Hong Kong Chile Norway Finland Oman Saudi Arabia Sweden Israel Germany UK Brazil Bahrain USA Philippines Change in Gross Fixed Investment (as % of GDP), 2003 - 2007 Source: EIU, 2007. 20090126 – Saudi Arabia.ppt 8 Copyright 2009 © Professor Michael E. Porter
  • 9. Foreign Direct Investment Flows FDI Flow Saudi Arabia (millions USD) Source: World Investment Report, 2008 20090126 – Saudi Arabia.ppt 9 Copyright 2009 © Professor Michael E. Porter
  • 10. Saudi Arabia’s Export Share Trends World Export Share By Type of Product, 1991-2006 (current USD) Source: UNComTrade, WTO (2008) 20090126 – Saudi Arabia.ppt 10 Copyright 2009 © Professor Michael E. Porter
  • 11. Innovative Capacity Innovation Output, Selected Countries Average U.S. patents per 1 million population, 2003-2007 Hong Kong Ireland South Africa Turkey Spain Brazil Mexico Kuwait Malaysia Argentina Egypt China Russia India Thailand Saudi Arabia Poland Chile CAGR of US-registered patents, 2003 – 2007 525 patents = Source: USPTO (2008), EIU (2008) 20090126 – Saudi Arabia.ppt 11 Copyright 2009 © Professor Michael E. Porter
  • 12. Determinants of Competitiveness Microeconomic Competitiveness Quality of the Sophistication National State of Cluster of Company Business Development Operations and Environment Strategy Macroeconomic Competitiveness Social Infrastructure Macroeconomic and Political Policies Institutions Endowments •  Macroeconomic competitiveness creates the potential for high productivity, but is not sufficient •  Productivity ultimately depends on improving the microeconomic capability of the economy and the sophistication of local competition 20090126 – Saudi Arabia.ppt 12 Copyright 2009 © Professor Michael E. Porter
  • 13. Macroeconomic Competitiveness Social Infrastructure and Macroeconomic Political Institutions Policies •  Basic human capacity •  Fiscal policy –  Basic education –  Government surplus/deficit –  Health system –  Government debt •  Monetary policy •  Political institutions –  Inflation –  Political freedom –  Interest rate spread –  Voice and accountability –  Political stability –  Government effectiveness –  Centralization of economic policymaking •  Rule of law –  Judicial independence –  Efficiency of legal framework –  Business costs of corruption –  Civil rights 20090126 – Saudi Arabia.ppt 13 Copyright 2009 © Professor Michael E. Porter
  • 14. Microeconomic Competitiveness: Quality of the Business Environment Context for Firm Strategy and Rivalry  Localrules and incentives that encourage investment and productivity Factor –  e.g. performance based salaries, incentives for capital Demand (Input) investments, intellectual property Conditions Conditions protection  Vigorous local competition  Access to high quality  Sophistication of local –  Openness to foreign and local business inputs competition customers and needs – Natural endowments – Strict quality, safety, and – Human resources Related and environmental standards – Capital availability Supporting – Physical infrastructure Industries – Administrative infrastructure (e.g. registration, permitting)  Availability of suppliers and – Scientific and technological supporting industries infrastructure – Information and transparency infrastructure •  Many things matter for competitiveness •  Successful economic development is a process of successive upgrading, in which the business environment improves to enable increasingly sophisticated ways of competing 20090126 – Saudi Arabia.ppt 14 Copyright 2009 © Professor Michael E. Porter
  • 15. Microeconomic Competitiveness: Cluster Development Huston Oil and Gas Cluster Upstream Downstream Oil Oil Oil Oil Oil & Natural Oil & Natural Trans- Oil Oil Distribution Wholesale Retail portation Trading Refining Gas Marketing Gas Marketing Exploration & Completion & Gas Gas Gas Gas Gas Gas Development Production Gathering Processing Trading Transmis- Distribution Marketing sion Oilfield Services/Engineering & Contracting Firms Specialized Equipment Technology Subcontractors Business Suppliers Services Services (e.g. Oil Field Chemicals, (e.g. Drilling Consultants, (e.g. Surveying, (e.g. MIS Services, Drilling Rigs, Reservoir Services, Mud Logging, Technology Licenses, Drill Tools) Laboratory Analysis) Maintenance Services) Risk Management) Specialized Institutions (e.g. Academic Institutions, Training Centers, Industry Associations) 20090126 – Saudi Arabia.ppt 15 Copyright 2009 © Professor Michael E. Porter
  • 16. Saudi Arabia’s Competitiveness Progress on the Competitiveness Index 2007 2008 Estimated Ranking: New Global Competitiveness Index 41 36 Macroeconomic Competitiveness 32 35 Microeconomic Competitiveness 53 36 GDP Per Capita Rank (ppp-adjusted) 36 36 Note: Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness. Source: Institute for Strategy and Competitiveness, Harvard University (2009) 20090126 – Saudi Arabia.ppt 16 Copyright 2009 © Professor Michael E. Porter
  • 17. Saudi Arabia’s Position Macroeconomic Competitiveness 2007 2008 Estimated Macroeconomic Competitiveness Index 32 35 Social Infrastructure and Political Institutions 48 41 Macroeconomic Policy 20 27 Note: Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness. Source: Institute for Strategy and Competitiveness, Harvard University (2009) 20090126 – Saudi Arabia.ppt 17 Copyright 2009 © Professor Michael E. Porter
  • 18. Saudi Arabia’s Position Microeconomic Competitiveness 2007 2008 Estimated Microeconomic Competitiveness Index 53 36 National Business Environment 53 35 Company Operations and Strategy 54 38 Note: Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness. Source: Institute for Strategy and Competitiveness, Harvard University (2009) 20090126 – Saudi Arabia.ppt 18 Copyright 2009 © Professor Michael E. Porter
  • 19. Macroeconomic Competitiveness: Saudi Arabia Social Infrastructure Macroeconomic and Political Policies Institutions •  Social policies have addressed poverty •  Saudi Arabian macroeconomic polices and basic social needs, but basic are generally sound, but transparency education and health remain remains limited weaknesses •  Political institutions are improving, but •  The budget is exposed to swings in oil the predictability and transparency of revenues, which leads to pro-cyclical reform is limited fiscal policies •  The Saudi legal system is improving, but •  Inflation has risen, exposing weaknesses fundamental reform is necessary in monetary policy 20090126 – Saudi Arabia.ppt 19 Copyright 2009 © Professor Michael E. Porter
  • 20. Saudi Arabia Competitiveness Strengths Note: Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness. Source: Institute for Strategy and Competitiveness, Harvard University (2009) 20090126 – Saudi Arabia.ppt 20 Copyright 2009 © Professor Michael E. Porter
  • 21. Ease of Doing Business Ranking, 2008 (of 181 countries) Saudi Arabia Favorable Unfavorable Median Ranking, OECD Saudi Arabia per capita GDP rank: 32 Saudi Arabia Doing Business rank: 16 Saudi Arabia 2010 goal: 10 2007 Rank (Change) 24 (+8) 3 (+2) 6 (-1) 33 (+17) 49 (+25) 38 (+10) 44 (-1) 48 (-2) 82 (+25) 51 (-8) 136 (-1) Source: World Bank Report, Doing Business (2008) 20090126 – Saudi Arabia.ppt 21 Copyright 2009 © Professor Michael E. Porter
  • 22. National Cluster Export Portfolio Saudi Arabia, 1998-2006 Oil and Gas (1.19%, 13.7%) $189,356,469 Saudi Arabia’s Average World Export Share: 1.67% Saudi Arabia’s world export market share, 2006 Plastics Business Services Chemical Products Prefabricated Enclosures and Structures Processed Foods Construction Materials Agricultural Products Jewelry, Precious Metals and Collectibles Metal Mining and Manufacturing Forest Products Change In Saudi Arabia’s Overall World Export Share: +0.95% Change in Saudi Arabia’s world export market share, 1998-2006 Exports of US$1.1 Billion = Source: Prof. Michael E. Porter, International Cluster Competitiveness Project, Institute for Strategy and Competitiveness, Harvard Business School; Richard Bryden, Project Director. Underlying data drawn from the UN Commodity Trade Statistics Database and the IMF BOP statistics. 20090126 – Saudi Arabia.ppt 22 Copyright 2009 © Professor Michael E. Porter
  • 23. Share of World Export’s by Cluster < 0.41% Saudi Arabia, 2006 0.41 – 0.84% Fishing & Textiles 0.84 – 1.67% Fishing Entertainment Prefabricated Products Hospitality Enclosures 1.67 – 3.34% & Tourism Agricultural > 3.34% Products Furniture Saudi Arabia’s Transportation Building Average World Distribution & Logistics Aerospace Fixtures, Construction Export Share: Services Vehicles & Equipment & Materials 1.67% Information Defense Services Tech. Heavy Processed Business Lightning & Food Jewelry & Construction Services Analytical Electrical Precious Services Education & Instruments Equipment Metals Forest Knowledge Power Medical Products Creation Generation Financial Devices Communi- Services cations Publishing & Printing Biopharma- Equipment Heavy ceuticals Machinery Motor Driven Production Chemical Products Technology Apparel Products Tobacco Leather & Oil & Automotive Related Gas Aerospace Metal Products Plastics Engines Manufacturing Footwear Sporting Marine & Recreation Equipment Goods Note: Clusters with overlapping borders have at least 20% overlap (by number of industries) in both directions. 20090126 – Saudi Arabia.ppt 23 Copyright 2009 © Professor Michael E. Porter
  • 24. Saudi Arabian Business Environment Progress in 2008 •  Significant efforts underway to improve the education system, especially universities •  Recent reforms in the financial sector, but high volatility of the domestic market is a sign of immaturity •  Improvements in business regulations, but much remains to be done •  Improved availability of ICT •  Some progress on encouraging larger presence of foreign companies in the Saudi economy •  Some progress on cluster development, especially in areas related to oil and gas 20090126 – Saudi Arabia.ppt 24 Copyright 2009 © Professor Michael E. Porter
  • 25. Saudi Arabian Competitiveness Selected Weaknesses Note: Rank versus 131 countries; overall, Saudi Arabia ranks 36th in 2008 PPP adjusted GDP per capita and 36h in Business Competitiveness. 20090126 – Saudi Arabia.ppt Strategy and Competitiveness, Harvard University (2009) Source: Institute for 25 Copyright 2009 © Professor Michael E. Porter
  • 26. Towards a Saudi Arabian Competitiveness Agenda •  Continue efforts on educational reform, including a stronger push on workforce development •  Make efficient capital provision to the private sector the central goal of financial market development •  Modernize corporate governance and reporting practices, especially in GLCs •  Shift the focus of business regulatory reform from discrete process improvements to improving the overall regulatory experience •  Use FDI attraction and the promotion of new business formation to challenge legacy market structures with little competitive pressure •  Create a comprehensive cluster development program to drive deeper competitiveness improvement and provide the structure for economic diversification 20090126 – Saudi Arabia.ppt 26 Copyright 2009 © Professor Michael E. Porter
  • 27. Clusters and Economic Policy Business Attraction Education and Workforce Training Science and Technology Investments Export Promotion (e.g., centers, university departments, technology transfer) Clusters Market Information Standard setting and Disclosure Specialized Physical Environmental Stewardship Infrastructure Natural Resource Protection •  Clusters provide a framework for organizing the implementation of public policy and public investments towards economic development 20090126 – Saudi Arabia.ppt 27 Copyright 2009 © Professor Michael E. Porter
  • 28. Towards a Saudi Arabian Competitiveness Agenda •  Continue efforts on educational reform, including a stronger push on workforce development •  Make efficient capital provision to the private sector the central goal of financial market development •  Modernize corporate governance and reporting practices, especially in GLCs •  Shift the focus of business regulatory reform from discrete process improvements to improving the overall regulatory experience •  Use FDI attraction and the promotion of new business formation to challenge legacy market structures with little competitive pressure •  Create a comprehensive cluster development program to drive deeper competitiveness improvement and create the structure for economic diversification 20090126 – Saudi Arabia.ppt 28 Copyright 2009 © Professor Michael E. Porter
  • 29. Clusters and Economic Diversification Upgrade the Quality and Upgrade Local Industries / Efficiency of Existing Export Clusters Products and Services Broaden Existing Clusters, Build Clusters Around Strong (Including Resources Clusters) MNCs Develop Related Clusters Invest in Enabling Conditions Build Positions in Clusters that Where the Country Has Cluster are Strong in Neighboring Specific Advantages Regions 20090126 – Saudi Arabia.ppt 29 Copyright 2009 © Professor Michael E. Porter
  • 30. Towards a Saudi Arabian Competitiveness Agenda •  Continue efforts on educational reform, including a stronger push on workforce development •  Make efficient capital provision to the private sector the central goal of financial market development •  Modernize corporate governance and reporting practices, especially in GLCs •  Shift the focus of business regulatory reform from discrete process improvements to improving the overall regulatory experience •  Use FDI attraction and the promotion of new business formation to challenge legacy market structures with little competitive pressure •  Create a comprehensive cluster development program to drive deeper competitiveness improvement and create the structure for economic diversification •  Unleash entrepreneurship and SME development 20090126 – Saudi Arabia.ppt 30 Copyright 2009 © Professor Michael E. Porter
  • 31. Emerging Companies and Competitiveness Emerging companies: •  are a crucial driver of competitiveness improvement •  create most of the new jobs in advanced economies •  increase the intensity of competition •  are the backbone of clusters Creating a culture of entrepreneurship in Saudi Arabia is a crucial priority 20090126 – Saudi Arabia.ppt 31 Copyright 2009 © Professor Michael E. Porter
  • 32. Entrepreneurship in Saudi Arabia The Opportunity •  Large, youthful and growing population •  Growing markets with many undefended niches •  Stable economy with a prudent investment posture •  Modest income taxes •  Large and sustained government investments in the economy •  Increasing foreign interest in investing in the Middle East •  Emerging venture capital industry •  Opportunity to serve the entire region 20090126 – Saudi Arabia.ppt 32 Copyright 2009 © Professor Michael E. Porter
  • 33. Entrepreneurship in Saudi Arabia Constraints Culture •  Absence of an entrepreneurial culture Skills •  Lack of a skilled Saudi workforce •  Absence of general and industry specific training programs for employees Regulatory Processes •  Still cumbersome government regulation, red tape, and user experience Infrastructure for Entrepreneurship •  Lack of program and supporting institutions for start-up and emerging companies –  e.g, incubators, technical assistance, and entrepreneur networks •  Lack of public visibility and media coverage of emerging companies Cluster Development •  Lack of supplier development programs at large companies •  Absence of cluster collaboration organizations providing support to SMEs 20090126 – Saudi Arabia.ppt 33 Copyright 2009 © Professor Michael E. Porter
  • 34. The Saudi Fast Growth 100 Fast Growth Companies 45 •  5 years and older •  Minimum of 4 million SAR (largest 3 billion SAR) •  40% compound annual growth rate •  Created 15,000 jobs in the past 5 years Winners are ranked according to their revenue growth and each company goes through a rigorous qualification process. Fast Growth Start Up Companies 27 •  Less than 5 years old •  198% average growth from 2006 to 2007 •  Minimum of 2 million SAR (largest 1.3 billion SAR) Fast Growth Companies to Watch 23 •  Up and coming. 20090126 – Saudi Arabia.ppt 34 Copyright 2009 © Professor Michael E. Porter
  • 35. Saudi Fast Growth Companies Facts & Figures •  Average entrepreneurial age at founding 32 years •  There are 8 women founders •  Winners are 100% college graduates, half with master’s degrees •  More than half have founded more than one company •  About 25% plan to go public •  80% plan to launch another business in the next 2 years •  Most common industries: High Tech & Telecom 23% Construction & Engineering 12% Health & Education 10% 20090126 – Saudi Arabia.ppt Management Consulting 35 10% Copyright 2009 © Professor Michael E. Porter
  • 36. Towards a Saudi Arabian Competitiveness Agenda •  Continue efforts on educational reform, including a stronger push on workforce development •  Make efficient capital provision to the private sector the central goal of financial market development •  Modernize corporate governance and reporting practices, especially in GLCs •  Shift the focus of business regulatory reform from discrete process improvements to improving the overall regulatory experience •  Use FDI attraction and the promotion of new business formation to challenge legacy market structures with little competitive pressure •  Create a comprehensive cluster development program to drive deeper competitiveness improvement and create the structure for economic diversification •  Unleash entrepreneurship and SME development •  Move from 10 by 10 to a broader competitiveness strategy 20090126 – Saudi Arabia.ppt 36 Copyright 2009 © Professor Michael E. Porter