Etla » competitiveness

Theory and Measurement of Competitiveness

Olavi Rantala — Wed, 14 Aug 2013 10:24:10 +0000

The study deals with the theory and measurement of competitiveness. The basic theory of firm implies that under constant returns to scale the unit cost of production can be used to measure the marginal cost of production and to model the impact of competitiveness on the market share of a firm. The competitiveness and the market share of a firm is the lower the higher its unit costs are compared to the average unit costs of all firms in the market. Empirical measurement of the unit costs of the Finnish industry is made with respect to Germany. It turns out that the unit costs of the Finnish industry have risen higher than the unit costs of the German industry since 2005, calculated without the effect of electronics industry. In addition to production costs the study deals with the theoretical and empirical impact of transportation costs on competitiveness in export markets. This is an important issue for Finland locating geographically far away from the main markets of the world. A major disadvantage for the future competitiveness of Finnish export industry will be the EU sulphur directive and the possible inclusion of shipping into the EU emissions trading scheme. The longer marine transportation distance from Finland means that Finland will lose competitiveness for example compared to Germany.

The Nature of the Finnish Competitiveness Problem

Mika Maliranta — Thu, 11 Apr 2013 12:04:39 +0000

We assess Finland’s competitiveness in the light of various, mainly short-term indicators. It turns out that the weak export market performance over the last few years is linked to the deterioration of profitability of production in Finland. A better export and employment performance requires a decline of relative unit labour costs and an improvement of business profitability. Wage moderation would obviously serve this purpose. On the other hand, the determinants of Finland’s long-term competitiveness are quite good and maintaining and developing them should remain a key element of economic policy also in the future. In contrast, it would be a mistake to believe that Finland’s current competitiveness challenges could be solved primarily by improving management skills.

Competitiveness and future challenges of Pohjois-Savo – A report for The Regional Council of Pohjois-Savo (in Finnish with English abstract and summary)

Martti Kulvik — Fri, 07 Sep 2012 11:00:00 +0000

The turnover of the companies in North Savo in 2011 was nearly 10 billion euros, of which industry accounted for just under a third. The industrial structure of the region is not strong, but on the other hand it is not alarmingly thin either, because it does have certain successful niches. North Savos production and export growth has been on par with the average of other regions. The region is specialized in forestry and machinery industries as well as food production. The forest and machinery industries are export-oriented. Promising growth businesses include biopharmaceutical research, testing and production. These segments will be the engines of growth for the region in the future. In the forest industry the wood products industry is strong and its special products, such as heat treated wood, glue-laminated timber and hardwood floors, are selling well. Pulp and paper production have suffered losses, but the carton is in demand. In the machinery industry, power plant boilers, forestry tractors and mining machinery are global successes. Their production networks include a considerable number of local sub-contractors. Counterflow strategies will be the key to future development. The forest industry will evolve into a biotechnology industry, where decentralized local bio-oil production instead of large plants will play a large role. Clusters can be built around wooden apartment buildings. The key skills of the machinery industry should be kept as Savos own secret, but the network of services and output should go global. In addition to timber, milk is one of the regions precious raw materials, the production of which should be safeguarded in the future. Research can facilitate processing of milk and timber into more lucrative products with higher value-added. Fresh, local and organic food production can be promoted via entrepreneurial training, product development, and use of competitive bidding in purchases of fresh food products by public institutions. Development of the pharmaceutical industry is following a dual strategy : the development of the biopharmaceutical industry is based on synergies and investing in research, entrepreneurship and the raising of risk capital. Neighbouring Russia is investing in the development of its pharmaceutical industry. Kuopios medical cluster could participate by helping in the development of medicines, approval process, manufacturing and packaging, as well as marketing to Western markets. Industrial development requires close-knit co-operation with government departments. The University of Eastern Finland, the Savonia University of Applied Sciences, vocational schools, research institutes and laboratories, Kuopio University Hospital and the Finnish Medicines Agency as well as authorities responsible for business development and funding are key players is this development.

Merenkulun toimintaedellytykset, kilpailukyky ja julkisen talouden sopeuttamistoimet – Taustaselvitys valtiovarainministeriölle

admin — Thu, 19 Apr 2012 11:00:00 +0000

The Ministry of Finance commissioned a report from Etlatieto Ltd on maritime operating conditions, competitiveness and the adaptability of this sector. The competitiveness of cargo ship has significantly improved when mixed-nationality crews were allowed and the Tonnage Tax Act went into force. The use of non-EU seamen reduces the labour costs of a ship by 20 to 30 %. The Tonnage Tax Act cuts the taxation of cargo vessels from 10-30 million euros to half a million euros. The mixed-nationality crew agreement does not apply to passenger ships. It is not worthwhile for them to shift to being taxed under the tonnage tax, because their store sales would be subject to special taxes, which would cut profitability significantly. In 2015, 0.1% sulphur limits for maritime transport will go into effect. In new ships, nitrogen oxides and carbon dioxide emissions must be limited. In addition, bilge water and waste disposal regulations will become stricter. These will result in significant pressure on investments. The EU is considering removing the VAT-free sales status of the internal transport, which would lower sales of passenger ships by 55 million euros and profit margins by 25 million euros. If the prevalence of mixed-nationality crews grows at current rates, this would lower shipping subsidies – in 2015 the savings would amount to over 10 million euros. Savings would also come from the rationalization of fragmented training, which would allow raising the level of training. Maritime rescue and VTS centres control functions could be combined in Helsinki and Turku. The government should concentrate ice breaking operations on safeguarding the transport of foreign trade and give up offshore business activities. The sale of offshore businesses and multipurpose icebreakers would finance new investments in the ice-breaking fleet without any additional debt and its interest expenses.

How to Restore Sustainability of the Euro?

admin — Wed, 21 Sep 2011 11:00:00 +0000

We reassess the result of unsustainability of the euro with respect to inflation differentials claimed by Wickens (2007) by specifying an open-economy version of a two-region New Keynesian model for EMU and demonstrate that the result by Wickens does not hold in general. We are able to derive a result that the model is determinate for a wide range of policy rules so that the sustainability of the euro area and the member countries is reached over time with respect to supply and demand shocks and emerged imbalances in price levels and competitiveness. We then enlarge the numerical analysis to consider EMU and sustainability in the case, prevailing currently, where a high debt country should both restore its competitiveness and its fiscal balance, and the policies re-quired from the single monetary policy and the national fiscal policies. Strong fiscal consolidation and far-reaching successful structural reforms are needed to reach sustainability in the sense that emerged imbalances in competitiveness and price levels and the threat of ever mounting debt levels could be eliminated over the medium run. We also illustrate how the current deflationary adjustment involves a major polarisation in economic developments within the euro area.

Kilpailukyky ja globaalin toimintaympäristön muutos – Suomen koneteollisuus maailmantaloudessa

Paavo Suni — Fri, 19 Aug 2011 11:00:00 +0000

The report analyses the impacts of globalization on competitiveness of national economies, industries and firms. The focus is in mechanical and electrical engineering and machinery. Global division of labor has significantly changed over the past few decades when the large emerging economies notably China have increased their role in worlds industrial production. Prices of industrial goods relative to GDP prices of developed countries have been falling thereby pressing the price competitiveness of industrial-country- firms who have been looking for new competitive edge on the global market. This includes offshoring and outsourcing and moving to service provision. The Finnish mechanical and engineering industry has adapted to changing global competitive environment through major structural changes the firm and plant structures have changed as consequence of exits and major reallocation of resources from less productive to higher productive units.

Price Formation and Market Functionality of Foodstuffs

Heli Koski — Mon, 01 Feb 2010 11:00:00 +0000

The study analyses the price formation and market functionality of the Finnish food chain. A significant portion of the report consists of international comparisons. The main comparison countries are the so-called old EU countries (EU15) of Western Europe, the new EU countries (EU12) and the United States. Comparisons are also made with individual countries. After the international comparisons, the price formation of the food chain, degree of concentration, competition, and the position of small producers is analysed for Finland in more detail. The main findings of the study are as follows : 1) a significant reason for the high price of foodstuffs in Finland is the high VAT, 2) the price level without VAT was in 2005 a couple of per cent higher and in December 2009 about 7 per cent higher than the average in the old EU countries, but it is considerably higher than in the new EU countries and the United States, 3) In Finland the price level of food-stuffs is elevated by the weak agricultural competitiveness (northern location and small farm size); on the other hand, the competitiveness of the foodstuffs industry and the wholesale and retail trade is rather good, 4) measured in terms of price-cost margins, competition works in Finland just as well in agriculture, the foodstuffs industry and the wholesale and retail trade as it does in the food chain of the comparison countries, 5) the large share of the wholesale and retail trade in the Finnish food chain is attributable to higher transport costs than in the comparison countries, 6) in Finland the prices of foodstuffs have moved in the same direction as in comparison countries, albeit with a lag of a few months; in 2009 the prices of dairy products, butter and margarine, meat, fish products and food products nevertheless fell by considerably less than in the comparison countries and less than the development of producer prices would have indicated, 7) the foodstuffs industry and the wholesale and retail trade are concentrated sectors; enterprises nevertheless compete with each other and with imports, 8) the degree of concentration, agreement practices and price development should be monitored especially in product groups where consumer prices have not fallen in line with a decline in producer prices, 9) access of small producers to markets is important from the standpoint of competition and consumer choice; the position of small producers can best be improved by fostering the exchange of information within the chain.

EU:n rahoituskehykset – Suomen asema seuraavalla kehyskaudella 2014-2020

Hannu Kaseva — Fri, 04 Dec 2009 11:00:00 +0000

The study analyses the financial framework of the European Union in 2014-2020 and the prospects of Finland in this framework. The study is structured according to budget headlines the most central of which are the natural resources (agriculture and rural development), cohesion (regional and structural policies), and competitiveness. Scenarios concerning the future are built upon alterna-tive developments in the composition of the budget. The development of Finlands net payment posi-tion is analysed using different assumptions of GDP growth. A central assumption in most scenarios is the fact that the budget shares of the natural resources and regional and structural policies will decline substantially, also giving room to cut the size of the budget. According to our study, Finland will be able to adjust to the changes in the structure of the budget. In the case of agriculture, an increase in the size of farms, productivity growth, and especially the assumed continued national agricultural support will have an outcome that the level of agricultural output does not change substantially. In regional policy, a decrease in the growth of or cuts in EU regional subsidies can be compensated for by na-tional subsidies. The pressures for adjustment which Finland will face during the future financial framework will be decreased because during the current financial period Finland already experienced many adjustments. Finland will be able to respond to the growth of funding under the competitiveness headline, if the country will be able to develop capabilities to apply for research and other competi-tiveness funding.

Cost Competitiveness of Chinese and Finnish Chemical Industries

admin — Wed, 31 Dec 2008 11:00:00 +0000

This study focuses on the labour cost competitiveness of the chemical industries in China and Finland in particular, using the corresponding German, the US and Estonian industries as a point of comparison in the early 2000s. This study deepens the analysis of the earlier study of the cost competitiveness of the manufacturing industries in the same group of countries. Separate studies focusing on the labour cost competitiveness are carried out in a parallel manner on the fabricated metal industries and paper industries. The results of these three sector studies deepen the knowledge about the change of competitiveness and its level. Large unit labour cost differences in a common currency were obviously a key factor behind exceptionally rapidly changing international production and trade structures in the late 1990s and early 2000s. The Chinese chemicals and chemical products and rubber and plastic products industries grew by 21 and 23 per cent per year in 2000-2007 as the average annual growth of the value added of world manufacturing volume was only 3 per cent in 2000-2006. Nominal wages as such do not imply good international competitiveness. Chinese wages are, however, low even if the Chinese low labour productivity is taken into account and costs per unit of production are compared in a common currency. The relative levels of the Chinese unit labour costs vis-à-vis Germany, using the unit value ratios (UVR) to make the production volumes comparable, were estimated to be about 6 and 2 per cent in the chemicals and chemical products and rubber and plastic products industries, respectively. In the case of the chemicals and chemical products industry, the ratio has even declined in the course of the 2000s, while in the rubber and plastic products industry it has been stable. Improving labour productivity in China had compensated for the effects of rapidly rising wages and an appreciating Renminbi Yuan in the case of the chemicals and chemical products industry and it had even more than compensated for it in the case of the rubber and plastic products industry.

Cost Competitiveness of Chinese and Finnish Fabricated Metal Industries

admin — Wed, 31 Dec 2008 11:00:00 +0000

This study focuses on the labour cost competitiveness of fabricated metal industry in China and Finland in particular, using the corresponding German, the US and Estonian industries as a point of comparison in the early 2000s. This study deepens the analysis of the earlier study of the cost competitiveness of the manufacturing industries in the same group of countries. Separate studies focusing on the labour cost competitiveness are carried out in a parallel manner on the paper and pulp and metal industries. The results of these three sector studies deepen the knowledge about the change of competitiveness and its level. Large unit labour cost differences in a common currency were obviously a key factor behind exceptionally rapidly changing international production and trade structures in the late 1990s and early 2000s. The Chinese fabricated metal industry grew by about 22 per cent per year in 2000-2007 as the average annual growth of the value added of world manufacturing volume was only 3 per cent in 2000-2006. Nominal wages as such do not imply good international competitiveness. Chinese wages are, however, low even if their low labour productivity is taken into account and costs per unit of production are compared in a common currency. The relative levels of the Chinese unit labour costs vis-à-vis Germany, using the unit value ratios (UVR) to make the production volumes comparable, were estimated to be about 2 per cent in the fabricated metal industry. The ratio has even declined in early 2000s and has stayed relatively stable after that till 2007. Improving labour productivity in China had compensated for the effects of rapidly rising wages and an appreciating Renminbi. The outlook of the fabricated metal industry is clouded by the difficult global financial crisis, which strongly restricts export possibilities and dampens also the domestic markets of industry. On the other hand the stimulus packages of the government target especially the key demand sectors of the fabricated metal industry.