ABSTRACT
8.2 COMPETITIVENESS ANALYSIS
The issue of competitiveness has been a concern of economists for the past two centuries, since Adam Smith and David Ricard028 first pressed the argument in favour of free trade and demonstrated its positive impacts on economic efficiency and standards of living. Since the last encounter with prohibitive trade barriers in the 1930's, nations have struggled with the conflict between the efficiency gains of freer trade and the adjustment burdens, which have had powerful impacts on selected regions and industries. But it must be recognized that recent decades have witnessed a remarkable reduction in the constraints on the international movement of goods and services.
The cumulative effect of events of the past two decades and the demise of the 'nation state' has, however, called this focus on the nation into question For some analysts the firm has emerged as the primary actor, while for the purpose of this thesis, the focus is on the small town. Inthis section of the thesis, the focus will be on the legitimacy of putting the nation, and the city, at the centre of an examination of competitiveness.
28Adam Smith,AnInquiry intothe NatureandCauses of The Wealth of Nations (1776), Friedrich List, The National System of Political Economy (1848) and Michael Porter, The Competitive Advantage of Nations (1990).
In the earlier chapters of this thesis, it was stated that globalization has dramatically altered the relative places of nations and sub-national entities in the global economy. As a result, national governments accept constraints on their ability to intervene in their own economies. All of this amounts to a substantial constraint on the ability of nations to intervene to redress grievances of domestic industries, regions and factors in economic difficulty.
Itwas also mentioned that technologies of production, transportation and communication have radically altered the economic spaces in which economic activity is conducted. Huge concentrations of industrial activity in big metropolitan areas have given way to global sourcing, product mandating and other new approaches to production.
The dramatic transformation in communication technology has made it possible to monitor and to control production processes from great distances and to locate decision-making and production activities according to criteria suitable to each function, rather than to locate them in close proximity to each other. As a result, many of the accepted notions of the importance of the fundamental concepts of location theory, such as centre, periphery, and economies of scale and of agglomeration, have been thoroughly reconsidered.
It has also been stated that, due to globalization, nations have somewhat diminished their capacity to intervene economically, therefore allowing cities to emerge as increasingly important economic actors. Indeed in Porter's widely discussed 'diamond of competitive advantage' local authorities have a key, if not the primary, influence on two of the four determinants: 'factor conditions' and 'related and supporting industries.
Nonetheless, whereas Porter still gives the impression that his primary emphasis is on the nation as a sum of the strength of its regions and cities, the emphasis of this thesis is on the strength or weakness of the individual cities and on their capacity to function as economic actors in the international economy.
In assessing the state of the urban economy, urban competitiveness or the ability of small towns to produce and market products when competing with comparable products from other regions is important. The concept of 'competitiveness' is relevant to this thesis given the fact that Local Economic Development is attributed to the 'New Competitiveness,' or the value proposition that cities need to develop their own LED strategies to prepare for the benefits and potential negative economic impacts of openinwaccessing their markets to the world markets.
The value judgment implicit in this argument is that the key reason for increasing urban competitiveness is to raise the standard of living of people who live in these small towns. By increasing the economic productivity of an area and marketing its most productive goods and services, the community can develop and grow at its greatest potential. Economic investment, well targeted and strategically focused, is a proven method for improving the vitality of a community. Given that. strong export economies make the city more competitive, it is beneficial for the city to support the export economy of the city. Moreover, if a city increases its competitiveness, the standard of living for the people in the urban regionwillrise
It was the purpose ofthisstudy:
• To examine the concept of 'the competitiveness of cities' and design an index to measure the competitiveness of cities,
• To make this concept operational in the context of small towns
• To use whathas been learnt to evaluate both the conditions of the case study areas and the strategic planning for their economic future in an international economy that is highly driven by competitive forces.
Competitiveness is measured through various lenses. Each measurement indicates different facts about the area's ability to attract investments. The table that follows provides a broad analysis of the strategic competitiveness of the selected case study areas. From the analysis of data obtained from this study, itisclear that none of these towns were successful in enhancing their international competitiveness. Itis for that reason that this thesis is calling for national government to observe specific changes in the characteristics of small towns' economies.
8.3 Competitiveness Index
Table 8.1: Comparative Analysis of Strategic Competitiveness
INDICATOR COMPETITIVE CASE STUDY PERFORMANCE
REQUIREMENTS
Growth The set of institutions,
•
Local econolDlc development competitiveness policies and structures in forums, government and business indicators place to sustain local structures participated m LED economic growth. forums in the Coal Rim area (Dundee),KwaDukuza and Howick.Efficient utilization of
•
Local policy framework through IDP resource allocation. and a series of governmentlegislation on municipalities.
•
Unclear use of local budget: there was large utilisation of consultants.•
Issues of corruption in the Coal Rim.Micro-economic Macro-economic No local growth plans in Ixopo, Glencoe competitiveness institutions and economic or Vryheid. IDP's were not linked to
policy supportive of LED. budget priorities
Technological index Technological innovations, Few manufacturing and value adding, as manufacturing activities. most case studies were dependent on raw material. One example is forestry in the case of Ixopo and sugarcane in the case of KwaDukuza. Neither of those products was processed in thearea.
Public Institutions Qualityinstitutions Local government transformed, with Index Resource allocation democratic elections in all of them
efficiency Financial control on project finance was Goodpublic expenditure relatively stable and legislation forced Export orientation responsible budget expenditure.
No export orientation in any ofthem.
Macro-economic Industrial development Confusion between LED, SMME, IDP in environment index initiatives all ofthem.
LED initiatives Ineffective LED processes
Spatial economic
framework
Nature of local Business retention and BRE attempted in KwaDukuza, Dundee.
responses: Project expansIOns No early warning systems for potential quality index Early Warning Systems economic crisis. Lack of understanding
Investment and trade oftradeandinvestment promotion.
promotion
Despite several projects attempted to stimulate the local economy, small towns lack the following attributesinrelation to competitiveness or successful effort to achieveit:
•
•
•
•
Extensive linkages to the rest of the world.
A highly educated labour force.
A full selection of business and professional services.
A superior transportation and communication infrastructure.
• A complex of research institutions appropriate to the city's competitive advantage.
• Large continentally- or internationally-engagedfirms.
• An environment that is conducive to formation of a dynamic set of small- and medium-sized firms.
• Adequate access to venture capital and to finance.
• Attractive industrial sites and office spaces.
• A supportive regulatory environment.
• Effective government.
• Effective linkages between the public and private sectors.
In conclusion, it is clear that, as small towns move with slow but sure steps toward the sidelines, they will become both more significant as economic actors and more aware of the increased burden on them to strategically plan for their economic futures in an environment in which they are increasingly exposed to challenges on existing economic activities and to opportunities for growth into new areas emanating from the international economy.
It is clear that each of these areas have their competitive advantages and disadvantages. Both Dundee and Ixopo are very low on the competitiveness scale and would therefore be unable, in the very near future, to attract job-creating industries. Both Howick and KwaDukuza have positive indicators and are likely to attract industries, which will create local economic growth, but not increased job opportunities.
CHAPTER NINE: FACTORS AFFECTING INDUSTRIAL MIGRATION - SOME KEY FINDINGS