1. KNOWLEDGE PERSPECTIVE ON ECONOMIC POLICY IN EU ACCESSION COUNTRIES
Knowledge Economy Forum
February 2002
World Bank
Paris

2. INGREDIENTS OF A KNOWLEDGE ECONOMY
Economic policy conducive to the establishment of a knowledge based economy
Building an efficient ICT infrastructure
Education system which trains knowledge workers
Fostering innovation systems serving private and public institutions

3. ECONOMIC POLICY FUNDEMENTALS
Price and trade liberalization
Hard budget constraint on banks and enterprises
Enabling environment for private sector, particularly new enterprises
Tax system and public expenditure program which promotes enterprise and government efficiency and fiscal balance
Stable macro-economic policy
Adequate financial market regulation

4. EU ACCESSION COUNTRY ECONOMIC POLICY PERFORMANCE

5. ECONOMIC GROWTH HAS RESPONDED TO POLICY

6. NEW ENTERPRISES ARE MORE PRODUCTIVE THAN OLD

10. WHAT MORE SHOULD ECONOMIC POLICY DO TO CREATE A KNOWLEDGE ECONOMY?
Is there more to it than good innovation policy, investment in higher education, and investment in ICT?
Will these additional policy measures, whatever they are, stimulate faster economic growth?

11. BALLYHOURA, IRELAND Community consultative group
Audit of skills by University of Dublin
EU Leader funds
Vocational training for adults
Rural tourism
Small scale enterprises
Agricultural innovation
Information technology and knowledge sharing

12. BALLYHOURA WAS TRANSFORMED
New agricultural technologies
Cooperative marketing
Training in Information technology
Telemarketing
Rural tourism
Knowledge was critical; but so was local initiative

13. BROADER LESSON: IRELAND PUT IN PLACE SOUND ECONOMIC FUNDEMENTALS
Fiscal soundness
Good exchange rate management
Tax policy and regulatory framework which encouraged new business start-up and profitability
Market discipline imposed on public enterprises
Corporate oversight
Efforts to attract foreign investment
Government investment in R & D

14. THE ECONOMIC BOOST IN EU ACCESSION COUNTRIES CAN COME FROM TECHNOLOGICAL ADVANCE
Advanced countries have economic policies which encourage innovation
EU accession countries must move from investment driven to innovation driven
(Global Competitiveness Study)

15. THE MOST ADVANCED ECONOMIES ARE INNOVATIVE World Economic Forum Global Competitiveness Report 2001/2002 (Jeffrey Sachs, Michael Porter, et al) Global Competitiveness Index – GCI / Current Competitiveness Index – CCI

16. THE INGREDIENTS OF MOVING TO AN INNOVATION BASED ECONOMY ARE MANY

17. INVESTMENT DRIVEN ECONOMIES: THE CURRENT PHASE OF EU ACCESSION POLICY
Harness technology from elsewhere
Foreign investment is key
High rates of investment
Enhance legal systems to support business efficiency
Attract new investors
Discipline old less innovative companies

18. EU ACCESSION COUNTRIES: COMPLETE BASIC ECONOMIC REFORM; AND ADD POLICY CONSISTENT WITH CREATING A KNOWLEDGE BASED ECONOMY
Eliminate subsidies to non-innovating old enterprises (mostly in agriculture, coal, mining, railways, shipbuilding, and steel)
Regulatory development for the financial system and creation of sophisticated capital markets, including a regulatory environment that encourages venture capital
Better protection of intellectual property rights
Policies to increase labor market flexibility (reduced mobility restrictions, low minimum wages, reduced termination restrictions)
Effective social safety net (coordinated pension, unemployment and social assistance schemes)
Continued building of legal and judicial institutions, with accountability of government
Improved allocation of public expenditure, including more funding of R & D, and of higher education, while maintaining fiscal stability
Policy to continue to reduce cost of start up by small and medium enterprises

20. (COMPANIES NEED TO CHANGE (DRUCKER)
Corporate governance needs reform; companies to focus on innovation, reduce hierarchy
Buyers, suppliers, producers are linked in network arrangements
Firms invest in training and skills upgrade (knowledge workers dominate)
Firms become global players