Executives Share Recipes for Global Success

May 6, 2013
A new study shares the thoughts of executives on how regions of the world must grow advanced manufacturing, create high-value jobs and seed overall economic prosperity.

For the United States to continue its success as a global manufacturer it will have to lower corporate tax rates, develop policies that support domestic energy production and craft education programs that grow the number of highly skilled workers. That’s the conclusion of Manufacturing for Growth, a new report released by the World Economic Forum and Deloitte.

According to the study associated with this report, the 70 global executives it surveyed crave government policies that simplify taxes and protect free and fair trade—along with stronger energy and infrastructure policies and more focused education and workforce frameworks. They also want science, technology and innovation policies that promote advanced manufacturing.

“Our report reflects the broad support—from business and government—that is necessary and exists today to create a progressive, innovative enabling environment for manufacturing,” said Andrew Liveris, chairman and chief executive officer of The Dow Chemical Company and global chief executive champion of the World Economic Forum’s Manufacturing for Growth project. “Manufacturing adds value—creating more jobs than any other sector; driving innovation throughout every segment of our society; and delivering consumer solutions—all of which are the keys to long-term, sustainable economic growth.”

“The manufacturing sector is an important part of balanced economic growth and business leaders could not be more clear—effective government policies are critical for a country’s manufacturing competitiveness,” said Joe Echevarria, chief executive officer, Deloitte LLP. “Manufacturing companies are anchors for national and global innovation, including leading research and development.”

According to the report—which is based on extensive input from chief executives and other senior executives as well as industry, academic and policy leaders—while the United States needs to focus on tax rates, energy production and education,  Germany must develop a more realistic approach toward energy transition. It should also focus on innovation within high technology and address the rigidity of its labor laws.

Japan must contend with a shrinking population, high taxes and limited access to natural resources, these executives believe, and to remain competitive, it should develop monetary policies that help stabilize exchange rates and address inflation. Japan should also lower tax burdens, develop employment policies that recognize today’s diverse labor market, and strengthen policies supporting long-term investment in science and technology.

Executives also indicate that while historically strong manufacturing nations must fight to maintain their competitive edge, emerging powerhouses will face a very different policy challenge: balancing growth with other national needs.

China, executives say, has rapidly become the world’s largest manufacturing economy, but lags substantially when it comes to the environmental and energy policies required for its national health and that of its citizens.

Similarly, India has indicated that by 2025 it plans to create 100 million new jobs and increase its manufacturing sector’s share of GDP to 25 percent. But to reach such lofty growth, executives feel that the country will need to implement less restrictive labor laws, invest in globally competitive infrastructure and relax policies governing the levels of foreign direct investment.

These executives also say that Brazil will need to focus on talent development, innovation and education—with a special emphasis on science and technology. Additionally, the country needs to invest in infrastructure projects that improve logistics and transportation and continue to invest in clean and sustainable energy projects. It must also simplify its tax system and establish political, legal and regulatory stability.

“Countries are now thinking more strategically about how to develop an integrated portfolio of public policies that enhance the overall innovation capability of the nation to design, develop and manufacture a wide variety of sophisticated products. That is, how to foster an advanced manufacturing ecosystem,” said John Moavenzadeh, senior director and head of the World Economic Forum’s Mobility Industries Team.

The three-volume report also demonstrates the economic impact a new production facility can have on a local community, including direct and indirect jobs as well as net economic impact. It states that a single production facility can have between $1 and $4 billion annual impact on a local economy and attract significant additional private investment to the area.

“The research shows that today’s manufacturing value chains are global, highly interconnected and rapidly changing,” said Craig Giffi, vice chairman at Deloitte LLP and consumer and industrial products industry leader. “Countries around the world are making the policy decisions and investments necessary to develop a more skilled workforce, improve their infrastructures and drive innovation—moves that grow advanced manufacturing, create high-value jobs and seed overall economic prosperity.”

Latest from Global Supply Chain