Economic Development of the Maghreb:

The Role of Technology and Innovative

SMEs
Pier A. Abetti, Ph D
Lally School of Management and Technology
Rensselaer Polytechnic Institute
Troy, New York, USA

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 Outline
1. Business competitiveness and
growth competitiveness of countries
2. World country rankings 2004
3. Maghreb – country rankings 2004
4. Maghreb – situation analysis
5. A roadmap for growth: the role of technology
6. Examples of countries that achieved high growth
through technology
7. Technology utilization, transfer and innovation
8. The role of innovative SMEs for economic
development and job creation
9. Conclusion: the challenge and a roadmap for the
Maghreb 2
 Business Competitiveness of Countries
• Source
World economic forum (Geneva) and Harvard
Business School (Prof. Michael Porter)
• Definition
Ability of firms in a country to create valuable goods
and services using efficient methods

• High wages, exports, and attractive returns to capital

• Improved quality of life and sustained investment

• Objective
Rankings of 117 countries
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 World Growth Competitiveness of
Countries
• Source
World economic forum (Geneva) and Harvard
Business School (Prof. Michael Porter)
• Definition
The set of country institutions and economic policies
supportive of high rates of economic growth in the
medium term
• Objective
Best estimate of prospects for growth over the coming
five years of 117 economies

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 World Growth Competitiveness – 2

• Methodology

Combination of hard data and executive opinion

survey of 4600 business leaders

These leaders compare aspects of local business

environment with global standards and make
investments and policy decisions that drive economic
growth and development

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 Growth Competitiveness
Ranking Criteria

1. Technology
2. Public institutions
3. Macroeconomic environment

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Country Competitiveness Rankings 2005 – 1

Business Growth
Country
Comp. Rank Comp. Rank
Δ
United States 1 2 -1

* Finland 2 1 +1
Germany 3 15 -12
Denmark 4 4 0
Singapore 5 6 -1
United Kingdom 6 13 -7
Switzerland 7 8 -1
Japan 8 12 -4
France 11 30 -19

* Countries to watch
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Country Competitiveness Rankings 2005 – 2
Business Growth
Country
Comp. Rank Comp. Rank
Δ
* Taiwan 14 5 +9
Ireland 17 26 -9
*
* Estonia 26 20 +6
South Africa 28 42 -14
Chile 29 23 +6
India 31 50 -19
Tunisia 35 40 -5
Turkey 51 66 -15
China 57 49 +8
Egypt 71 53 +18
Morocco 79 76 +3
Algeria 95 78 +17
* Countries to watch 8
Implications for the Maghreb
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 Maghreb – Summary of Rankings 2005

Tunisia Algeria Morocco

Business competitiveness 35 95 79
– Company operations 46 111 80
– Business Environment 34 75 88

Growth competitiveness 40 78 76
– Macroeconomic
34 44 67
environment
– Public institutions 40 81 85
– Technology 60 114 78

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 Tunisia – Situation Analysis
1. Tunisia is the leader among North African countries
and second among African countries (after South
Africa)
2. Tunisia’s leadership is caused by good
macroeconomic and business environments with
solid public institutions
3. However, Tunisia is falling behind in growth
competitiveness due to inefficient company
operations
4. In turn, these operations and economic growth are
affected by the below average technology ranking

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 Algeria – Situation Analysis
1. Algeria is an emerging country, fourth in North Africa
2. Algeria’s average position is caused by poor business
environment, public institutions and inefficient
company operations
3. Algeria is moving ahead rapidly in growth
competitiveness thanks to good macroeconomic
environment
4. However, the very low technology ranking negatively
affects company operations and economic growth

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 Morocco – Situation Analysis
1. Morocco is third among North African countries
2. Morocco’s position is caused by below average public
institutions, business and macroeconomic
environment
3. Morocco’s slowly improving growth competitiveness
is hampered by inefficient company operations
4. In turn, these operations and economic growth are
seriously affected by the low technology ranking

Technology is the major

challenge for the Maghreb

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 A Roadmap for Growth of the Maghreb
1. World competitiveness is driven by five factors that
can be visualized as five drivers of economic growth

2. Each country should strengthen the strongest horse

to maintain momentum
Tunisia – Business environment
Algeria – Macroeconomic environment
Morocco – Macroeconomic environment
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A Roadmap for Growth of the Maghreb – 2
3. World competitiveness can also be visualized as a
chain of five links. The strength of the chain is
determined by the weakest link

4. Technology is the weakest link for the Maghreb

5. Technology is the key for improving operations,
developing exports and creating high-value-added
employment

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 How can the Maghreb improve
its technology position?

By following the example of

young, entrepreneurial countries
that have achieved high
economic growth

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 Examples of High Growth Through Technology

Size GDP
Indep. Population GDP/PP* GDP/PP* Techn.
Country (1000 Growth
(date) (millions) ($billions) Capita ($) Rank
km2) %/year
1922
Finland 337 5.2 151 29,000 3.0 2
(1946)
Taiwan 1946 36 22.5 576 25,300 6.0 3
Estonia 1991 45 1.4 19 14,300 6.0 18
Ireland 1937 70 3.9 126 31,900 5.1 31

Tunisia 1956 163 10.0 71 7,100 5.1 60

Morocco 1956 446 32.0 134 4,200 4.4 78
Algeria 1962 2382 32.0 212 6,600 6.1 114

* PP = Purchasing Parity
Source: U.S. Government (2004 estimate)
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 Three Modalities for
Technology Utilization

Technology can be embodied in

• Products (cellular phones – Nokia in Finland)
• Processes (mosquito repellents – Zobele in
Italy, Malaysia)
• Services (software – Microsoft in USA, Ireland,
India)

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 Technology Transfer

1. Technology required by the Maghreb countries

is available at no cost, or with moderate fees
from USA, CEE, and Japan
2. However, technology must be selectively
sought and transferred proactively and
continuously
3. Two extreme cases:
• Mexico and Taiwan had equal access to
U.S. technology since 1950
• Taiwan is now ranked 3, Mexico 57
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 Abetti’s Laws for Technology Transfer

1. Technology is transferred by people, not paper

2. Market pull transfers more technology than
technology push
3. Embodied technology is worth much more
than disembodied technology
4. Initially technology transfer rate (D =
1
_
distance), later almost independent~
– D of
distance

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 Technological Innovation
1. Once technology has been successfully transferred it
must be adapted and improved through technological
innovation
2. Successful innovation implies the profitable utilization
of the new technology for new applications and
markets
3. Sources of innovation:
• Universities
• Large companies
• Government labs
• High-value-added SMEs
4. High-value-added SMEs will be the major contributors
to growth, employment and world competitiveness in
the Maghreb
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 Examples of High Growth Through Technology

Size GDP
Indep. Population GDP/PP* GDP/PP* Techn.
Country (1000 Growth
(date) (millions) ($billions) Capita ($) Rank
km2) %/year
1922
Finland 337 5.2 151 29,000 3.0 2
(1946)
Taiwan 1946 36 22.5 576 25,300 6.0 3
Estonia 1991 45 1.4 19 14,300 6.0 18
Ireland 1937 70 3.9 126 31,900 5.1 31

SMEs are the major

contributors of these economies

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 Innovative SMEs – 1

Innovative SMEs represent a major national

resource, because they:
• Create direct high-value-added jobs
• Create indirect jobs (5 to 1 factor)
• Are more innovative and efficient than large
enterprises (public or private)
• Promote exports
• Improve the quality of life

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 Innovative SMEs – 2

Innovative SMEs represent a major national

resource, because they:
• Have higher survival rate than other new
businesses
• Do not rely on scarce natural resources
• Are diversified in technologies and markets
• Are models for developing innovation in the
country
• Are the major source of job creation

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U.S. Fortune 500 Share of Employment

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U.S. Job Growth, ’90-’94

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 Entrepreneurship Explosion

• Fortune 500 share of employment

plummeted from 19% in 1968 to 9% in 1996
• Large businesses dropped nearly 4 million
jobs in 1990-94
• Firms with less than 50 employees swelled
by 8 million new jobs. The smallest created
the most jobs

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 Conclusion –
The Challenge for the Maghreb

Creation of high-value-added jobs for the

new well-educated booming generations

Prevent unemployment, emigration, social

unrest

Healthy, sustainable economic growth

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Conclusion – A Roadmap for the Maghreb
Economic growth

High-value-added employment, exports, world trade

balance

Innovative SMEs

Technology and management skills, enlightened

government policies

We are here to work with you!

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