1. 1 Fill in the blanks… “Today, mandatory certification and standardization are among the major barriers to innovation and development in Ukraine. They make introducing a new product next to impossible […]” - President Yushchenko* *Kyiv, Ukraine, July 10, 2008, third Presidential Forum “State and Business Are Partners (source: http://www.ifc.org)

2. ECA’s Quality Competitiveness Jean-Louis Racine The World Bank Knowledge Economy Forum VIII, Fontainebleau May 1, 2009

3. 3 Outline ECA countries compete mostly on price. The national quality infrastructure: invisible but essential for innovation and trade. ECA’s quality infrastructure is not conducive to enhancing quality competitiveness. Reforms challenges.

4. 4 How ECA Competes On Quality

5. 5 What is Quality? Quality Customer expectations Standards Regulations and laws

6. 6 Improvements in quality competition Improvements in price competition CIS countries are lagging behind Note: excludes textiles, apparel and leather sectors CIS + Georgia Relative unit values of exports to the EU Bubble size indicates intra- industry trade Better quality

7. Most industries in ECA compete on price Compete on quality in more sectors Compete on price in more sectors Data is more reliable Number of industry sectors competing on price and quality 7

8. Many ECA countries export in sectors with limited prospect for quality upgrading 8 Export in price- competitive industries Export in quality- competitive industries Pharmaceuticals Machine-tools Made-up textile articles Pharmaceuticals Machine-tools Made-up textile articles Articles of concrete Basic iron & steel Primary batteries Articles of concrete Basic iron & steel Primary batteries CIS + Georgia EU + Turkey Share of exports to the EU in quality-dominated sector

9. In the CIS economic restructuring has led to mixed opportunities for quality upgrading 9 Share of exports to the EU

10. Upgrading strategies for ECA CIS + Georgia: diversify into sectors with quality upgrading potential. EU, Turkey and Balkans: focus on diffusing existing quality practices to more enterprises. 10

11. 11 Overview of the National Quality Infrastructure

12. What is the national quality infrastructure? StandardsAccreditation Metrology Conformity Assessment 12

13. 13 Accreditation & conformity assessment National accreditation body Certification bodies, inspection bodies, calibration laboratories, testing laboratories accreditation Firms and other organizations conformity assessment

14. 14 National and international consumers, public health and safety, natural environment Manufacturers, research institutes, universities National metrology institute Calibration laboratories Metrology

15. 15 International Integration Mutual Recognition Agreements (MRAs) in accreditation and metrology ensure that trade partners recognize each other’s conformity assessment systems

16. 16 ECA’s Quality Infrastructure

17. 17 Key Issues in ECA In ECA, the national quality infrastructure is often Based on technical regulations (i.e. mandatory standards) Highly centralized and dominated by government institutions Often not harmonized with and not recognized by that of trade partners

18. 18 There is a strong effort to harmonize standards in countries bordering the EU, but not in CIS countries Composition of the national standards

19. 19 There are two major gaps with accreditation Accreditation rates are very low in some countries… Share of testing laboratories which are accredited

20. 20 There are two major gaps with accreditation …and… Number of accredited ISO 9001 certification bodies

21. 21 There are two major gaps with accreditation …and many accreditations are not internationally recognized Number of accredited ISO 9001 certification bodies covered by an MRA

22. 22 Most ECA accreditation systems are internationally isolated Number of accreditation MRA fields

23. Metrology systems in ECA are not widely recognized 23 Number of registered calibration and measurement capabilities Not part of the CIPM MRA

24. Some metrology institutes are not contributing to economic development 24 Number of calibrations conducted by the national metrology institute

25. 25 Incentives for Reform EU accession WTO Technical Barriers to Trade agreement Export competitiveness Business environment

26. 26 Key Challenges Adopting international standards takes time, money and skills An abrupt transition to an international voluntary system will results in temporary gaps in the national quality infrastructure Incentives are reduced if regional trade partners are not using international standards either Political economy challenge of transition to a voluntary decentralized model –Weakened institutions –Removal of technical barriers to trade