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measuring Scotland's progress towards A SMART, SUCCESSFUL SCOTLAND
involvement in global markets
LEAD INDICATOR
7A - PROPORTION OF EMPLOYERS EXPORTING
Why this measure?
The proportion of employers exporting is a tangible measure of the more intangible concept of openness to foreign trade. As a small economy Scotland should perform well by this measure, as much through necessity as choice, but openness does not reflect only exposure to trade, it measures exposure to ideas and knowledge. The increased competition of the global market makes the necessity for Scotland to learn from competitors and preserve its comparative advantage all the greater.
How does Scotland perform?
Exports as a percentage of GDP (1999)
The measure used as a proxy for the proportion of employers exporting was exports as a percentage of GDP. Scotland lies in the first quartile of a 31-country OECD sample when exports to the rest of the UK are included and in the second quartile when they are excluded. Ireland, Belgium and Luxembourg lead the first quartile with the Scandinavian countries in the second quartile. Unsurprisingly the large countries - USA and Japan - are in the fourth quartile. Ireland's strong export focus, due to the presence of many multinational firms, puts it some way above the other comparator countries. The high value of export sales as a percentage of GDP may be partly accounted for by transfer pricing, which may raise the price of exports, undertaken by multinationals to take advantage of the low corporation tax rates within Ireland. But the level of this activity will depend crucially on the value of exports accounted for by intermediate sales - sales within such companies - as opposed to sales of final market goods.
What does this mean for Scotland?
Scotland continues its strong export performance to the rest of the UK and the rest of the world as shown in last year's report. This reflects the strong export focus of many of Scotland's businesses and the relatively small size of the Scottish economy.
7B - PROPORTION OF EMPLOYERS WITH OVERSEAS ALLIANCES, OPERATIONS, JOINT VENTURES, MERGERS AND ACQUISITIONS
Why this measure?
As well as exports, the ways in which Scottish businesses interact with overseas firms will heavily influence the development of ideas and productive techniques in Scotland's economy. The acquisition of these skills will help raise Scottish productivity while exposure to different business environments will improve the exchange of ideas.
How does Scotland perform?
There is no data source available currently that measures the proportion of employers with overseas alliances, operations, joint ventures, mergers and acquisitions. However, a recent survey by Scottish Enterprise of 957 manufacturing firms does give an indication of the relative importance of each. A total of 521 overseas operations were undertaken by these companies, though the data do not allow a breakdown of how many of these operations each firm engages in, however, the most common were the establishment of representative offices and strategic alliances while joint ventures and franchising were the least common. The survey also gave a geographical breakdown of each activity and unsurprisingly North America and Europe were the dominant areas.
What does this mean for Scotland?
As a small open economy Scotland should perform well in this measure, but there is no international comparison available to allow a conclusion to be drawn.
7C - EXPORT SALES PER WORKER
Why this measure?
Export sales per worker indicate how successful Scotland's businesses are at looking outwards to the global market and offering products and services that are capable of competing in that market.
How does Scotland perform?
Export sales per worker (2000)
Including exports to the rest of the UK puts Scotland in the first quartile of a 31-country OECD sample, while excluding them places Scotland in the second quartile alongside countries such as Canada, Finland and Germany. We should expect small economies to export more, however, the gap between Ireland and Scotland indicates the exceptional focus of the Irish economy on exports through their strong multinational company presence. As with indicator 7a the figure for Ireland may be higher than expected due to transfer pricing by many multi-national companies found there.
What does this mean for Scotland?
The results show that Scotland is an open economy engaged heavily in external trade. It should be noted that the figure given is for gross exports per worker and takes no account of the value of imports per worker. This figure should be high for Scotland given the relative size of the economy and will vary across industrial sectors with, for example, the electronics industry having a high value of imports per worker while the whisky industry has a low value of imports per worker.
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