Competitiveness cannot arise from natural resources but rather from cap-abilities. In NY, investment firms prosper in proximity to banks that finance them and the clients who hire them and a pool of specialized talent huddled into a knot. Equally, the Pearl-River-Delta (PRD) is a hardware-hub of innovative clusters creating value from knowledge. Accounting for 1% of territory and 5% of China’s population- it generates more than 10% of its GDP and 25% of its exports.
It absorbs 20% of foreign direct investment (FDI) and attracted over a trillion dollars-worth of FDI since 1980. Hong Kong remains committed to cross-border financial-flows, accounting standards, free speech and the rule of law and acts as a capitalist-filter permitting the flow of people, skills, ideas, talent and capital into the Delta.
Of its nearly 2,000 start-ups, half were founded by foreigners. Zhejiang has 33,000 foreign-invested firms, Shanghai has about 75,000 and Guangdong has over 110,000.
The PRD generates half of the mainland’s patents. Between 1980 and 2016, Shenzhen’s GDP grew at an average annual rate of 22% and now stands at 2trn yuan. The Nanshan district is home to 125 listed firms with a combined market value of nearly $400bn.
Unlike Beijing, which has numerous top-tier universities, Shenzhen has a handful of lackluster ones.
The advance came disruptively from below. Laws emerged to protect non-mainland firms and finance.
When the risk yielded results, they were backed from above. China Inc. adds 87% to its exports- and that is no CopyCat.
Liu Zihong started his company in Shenzhen because his notion of ‘integrated-innovation’ requires new materials, processes, and customised tools to make flexible screens for cups and clothes.
Nothing in California matches Shenzhen’s cosmopolitan ecosystem of makers. In NY and the PRD, clusters with cosmopolitan workers spawn and spread ideas.
The size of each cluster depends on the size of the economy. Open a national economy to a world’s worth of trade and the most productive clusters advance. Finance firms in London outcompete Frankfurt; California internet firms overwhelm competitors in Paris. Firms in poor places have to up-their-game or sink. Globalisation has been good to the richest firms and places.
In 2015, France’s Amazonian French Guyana- a former slave and penal colony- exported €138.6m. Imports including wood amounted to €1.2bn. 40% of the people live in poverty. Food products are 45% more expensive than on mainland France. 43% of the population is under 20. Half of those under 25 have no jobs. The unemployment rate, at over 20% is more than double that of the mainland France.
From Columbus to Chavez, the West Indies remains manacled by institutional and intellectual dependency and an outsider in Latin America. To advance, the regional tertiary sector including offshore providers must engage in programme articulation and deepening the discussion on the impact of Brexit on the fortunes of the region and then using a ‘smart specialisation’ (SS) framework to uncover future regional capability and Caribbean comparative advantage.
This involves mapping capabilities to opportunities across regional and global markets. It is a process of entrepreneurial discovery and is not the outcome of a foresight exercise nor is it a top-down industrial approach driven by a pre-scribed ‘grand écrit’. Ultimately, the GATE subsidy will focus on specific areas for diversification, geographical growth poles and the economic zones within growth poles.
Perhaps GATE may have been spread too thinly across too many mushrooming areas. Consequently, the impact in any specific area is not significant enough to produce the brink levels of innovative activity for sustainable growth.
The burgeoning market for natural- fibre-clothing using banana, hemp and pineapple fabrics is instructive. The horizontal propagation of any general purpose technology (GPT) in fashion throughout the economy via co-invention of applications and successive elaborations will extend the frontier of invention possibilities across the CSME, while application development changes the production function of the sector. Co-invention increases the market size and increases the return on the innovation activities related to it.
Feedback loops will increase the return on subsequent inventions and as the process advances, investment in research will cause marginal rates of return to reach higher thresholds. Perhaps only then can the outsiders in Latin America become the Bocas del Dragón.
