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Strategic direction to the Enterprise Networks and an enterprise strategy for Scotland
the challenge we face
To achieve our vision we face a challenge. In 2001, Scotland's devolved government published measures for assessing progress in achieving a smart, successful Scotland. The measures compare performance with other OECD countries. The latest report against these measures was published in August 2004. (Annex A provides further detail on the measures used.)
Sustainable economic growth
The lead measure for overall performance is Gross Domestic Product (GDP) per head. Absolute GDP per head has increased since 1999 - as it has in other countries. Our relative performance has also improved slightly. However, Scotland continues to rank in the third quartile of OECD countries and the level of carbon emissions (a measure of sustainability), while reducing, remains high in comparison with OECD countries. While the performance of many countries in the second and third quartiles is not far apart, we face a challenge in achieving our first quartile objective.
Productivity
Scotland will not improve its economic growth by competing on the basis of low wages: others can do this far better. Underlying the growth figures lies a weak performance in terms of productivity - in other words, the value of products produced per hour worked. We have to compete by offering high value products and services embodying innovation and the deployment of high level skills. We have companies following this path but not in sufficient numbers. But even where we are doing well, innovation and skills require continuing effort to maintain and improve competitive advantage.
Underlying factors
The progress measures look at underlying factors in achieving better productivity. These include:
- business investment in research and development - laying the foundations for advances in products and processes
- the extent to which the company base as a whole innovates - not necessarily developing products, processes or designs new to the world economy but effectively deploying new developments as they become available
Scotland is weak in business research and development (R&D), linked to the nature of our company base. But it is also weak in introducing product and process innovations.
In skills, learning and employment we tend to compare better. But there are still challenges in how we effectively harness our resources:
- there are too many young people who are not in education, employment or training
- unemployment and high levels of economic inactivity sit alongside job vacancies in some parts of the country
We must address these challenges so as to increase economic growth and close the opportunity gap:
- Our higher level skills are not always used effectively and the outflow of skilled people needs to be reduced
A key challenge relates to population. In-migration is low compared to OECD countries and population is declining and ageing. More people coming to live, study and work in Scotland will help us to reverse population decline, grow our skills base, import fresh ideas and promote diversity in our workforce.
The pace of global change
In addressing these challenges, we also have to realise that the pace of change in the global economy is increasing:
- consumers are demanding high quality, low price, innovative products and services
- new competitors - and markets - are emerging, notably China and India, where low wages are combining with high skill levels
- the movement of capital, goods and people continues to increase
- technology is advancing ever more rapidly e.g. the digital revolution and life sciences
The task ahead
Scotland has many strengths, including world class businesses and industries. It has a strong research base in its excellent universities, world renowned cities and a skilled and flexible population. These help create a firm foundation for achieving our vision. So there are strengths to build upon, while we do not lose sight of the weaknesses that need to be addressed.
The private sector will be the main driver for economic growth but with an increasing role for the growing and innovative social economy sector. The ability of businesses to deploy resources effectively, innovate and understand markets is critical, as are the skills, entrepreneurship, ambition and leadership of their staff. The public sector must help to develop the right environment in which businesses and individuals can develop their full potential, as set out more fully in FEDS. Increased public sector efficiency must underlie this support in order to keep pace with the rapidly changing economic environment and this is being addressed through our Efficient Government initiative.
The challenge for the Enterprise Networks, and others supporting business development, is to act as a catalyst to make things happen better, smarter and faster than they otherwise would. The focus must be on where the Networks can add most value and so contribute to sustainable economic growth through higher levels of activity and improved productivity.
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