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Where is Wales’ position in the new global economy?

Technological change and globalisation represents fundamental challenges for individuals, firms and policy makers in Wales, which is why individuals need to develop and continuously upgrade their skills, while firms need to radically change the organisation of their operations within and across the boundaries of nation states.

 

Recent global economic turbulence means that decision-makers now have to look at wider economic policies that have to take account of fundamentally altered global markets, while structural microeconomic policies – which affect the competitiveness of indigenous firms – are gaining increasing importance.

 

We need to develop a new knowledge-based economy in Wales, and our policies must address a wide spectrum of issues such as intangible assets, knowledge infrastructures and flows, and intellectual property rights. At the same time there is a need for coherence between wider macroeconomic policy, as well as among the components of narrower economic policy.

 

We need to take a fresh look at our traditional sectors – primary resources, manufacturing, and construction – and judge afresh their importance in our economy relative to the service sector.

 

We need to renew our efforts to open foreign markets for Welsh goods and services, country-by-country and region-by-region, by concentrating on market access issues and developing strategies to overcome obstacles faced by Welsh businesses.

 

Wales has much to offer in terms of its culture and products, and we need a shop window to display them to the world. We have to communicate our unique selling points to targeted customers, whether they be investors, visitors, or overseas customers.

 

And we need to find out how far our industrial structure is becoming increasingly knowledge-based and technology-intensive, with competitive advantage being rooted in innovation and ideas – the foundations of the new economy. Industrial structural change is continuing to occur in parallel with increases in knowledge intensity. Our economy is moving up the knowledge intensity scale.

 

The Welsh Government needs to examine the extent and nature of changes in the global industrial structure and Wales’ place in this by addressing four policy-related questions:

 

  • What has been the extent of structural change in the economy? Which industries have experienced growth? Which industries have not?

  • Has the pace of structural change been accelerating?

  • Is the Welsh economy becoming more innovative? Is it increasing its use of knowledge, technology, skills, etc.?

  • What are the key factors driving this structural change: final domestic demand, exports, imports, or technical change?

 

Structural change in the manufacturing sector needs to occur in parallel with changes in technological intensity, in the skill intensity of output, and in wage levels. High-technology industries in the Welsh manufacturing sector – those which spend a high proportion of their resources on research and development (R&D) – need to experience a higher growth rate than the sectoral average.

 

While in the past domestic demand was the dominant factor influencing the growth of our industries, international trade needs to become much more important. High-knowledge industries in the tradable sector need to benefit the most from export performance: low-knowledge industries have traditionally seen their relative decline hastened by import competition, and this is a trend we need to reverse going forward.

 

Exports will become an increasingly important factor for change in high-technology manufacturing industries. Rising imports have contributed to the loss of output share in low-technology industries.

 

For the service sector, the domestic market remains predominant. This is a reflection of the fact that services are not traded to the same extent as goods. Within the manufacturing sector, high-wage industries are generally export-orientated, and this is what we need to aspire to.

 

 

 

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