Secretary-General

Investing for Growth?

 

Remarks by Angel Gurría, OECD Secretary-General, delivered at the International Transport Forum Annual Summit


Leipzig - Germany, 22 May 2013


(As prepared for delivery)
 
Ministers, distinguished speakers, ladies and gentlemen:

It is a great pleasure to be here to participate in this International Transport Forum’s (ITF) Annual Summit and particularly in this Panel where we will discuss the issue of ‘Investing for growth?’
 

I must accept I like the little question mark you added to the title of this panel. What normally would be stating the obvious, Investing for Growth, today, 5 years into the crisis, is more a question mark than a statement!

I know that as a panellist I only have four minutes so I am just going to make a few points to trigger some discussion.

First of all, many of our governments are still operating under extremely tight budgetary margins. The general government deficit in the OECD reached -5.5% of GDP  on average in 2012. The general government debt-to-GDP ratio is projected to reach 111% in 2013 in the OECD area.  This means that many governments have run out of firepower on the fiscal side to stimulate the economy. Most of them are also running out of space on their monetary policy. So they are having a very hard time in becoming the emergency engines for growth and employment.

My second point regards the private sector’s diminished investment drive. This is what I call the investment business contradiction. Many OECD economies are cutting down debt and saving, whereas interest rates and the cost of borrowing are close to zero. Instead, they should be borrowing and investing all around.

What do we do to start the engines again?

For the OECD, the most effective way of doing this is through the implementation of structural reforms. In fact, we recommend focusing reforms on 4 key objectives: we say “Go Structural”, “Go Social”, “Go Green” and “Go Institutional”. Reforms in these 4 areas can trigger new investments that can contribute to jumpstart growth and employment in the short term, but also build the foundations for stronger, cleaner and fairer growth in the long term.

My suggestion is that we target our reforms to facilitate investments in three key sectors: skills, innovation and infrastructure.

Investing in skills is crucial to promote inclusive growth. A highly-skilled labour force is essential for boosting productivity and growth. As such, quality education provides a cornerstone in boosting competitiveness, raising living standards and ultimately playing a key role in reducing social inequalities. Our Skills Strategy reveals that if student performance in the OECD area is raised by just half a school year, that would add USD 115 trillion to the economy over the working life of the generation born this year.

Investing in innovation is also crucial for lifting productivity and boosting growth. Think of Knowledge-based Capital (KBC), the growing universe of software, databases, patents, designs, digital networks and organisational know-how. This is one of the few sectors that are growing throughout the crisis. Geo-location data and location-based services, for example, could generate almost 500 billion US dollars in consumer value by 2020.

Last but not least, infrastructure. And here transport infrastructure is fundamental. Our countries need to rebuild their transport networks to transit to a new era of more intelligent and environmentally-friendly transport technology. Investments in clean transport infrastructure can generate a variety of network effects.

 

Take the case of ports. Port-attracted industries can represent a relatively large share of employment and value added in port regions. For example, in the main port regions in North West Europe, they represent up to 10% of employment and 16% of value added. Reforms that stimulate investment in clean transport infrastructure can have a double dividend: promoting inclusiveness and green growth.

Let me conclude with one last suggestion. Our reforms, just as our decisions to cut spending or keep growing our debts, have to be focused on one priority: the people. I’m talking about the nearly 62% of the world population that lives on less than 5 dollars a day ; the more than 200 million unemployed worldwide;  the nearly 75 million youngsters out of job;  the poor and vulnerable. Let’s not forget that growth is not an end in itself, but a means to improve the lives of people.

Thank you very much.

 

 

 

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