50th Anniversary Conference, Association des Journalistes Economiques et Financiers


Remarks by Angel Gurría, OECD Secretary-General,
50th Anniversary Conference
Association des Journalistes Economiques et Financiers (AJEF)
Paris, 9 January 2007

 It is a pleasure for me to be here with you this morning.

 It gives me the opportunity to congratulate the members of the French Association of Economic and Financial Journalists on the Association's 50th anniversary of serving the public with informed and honest journalism and to express the thanks of the OECD for your diligent attention to our work.

 No democratic society can function effectively without journalism based on professional integrity, reliable information and broad understanding. Your role is critical.

 You, as informed and dedicated journalists, and we at the OECD, as professionals concerned with policymaking, share a common need - objective, credible and relevant information as a basis for building new knowledge and understanding of the world in which we live.

 Societies can debate different ways of solving economic, social or environmental problems. But if such debates are to be productive they should be based on shared confidence in the underlying data.

 In democratic societies, where governments are accountable to the electorate, judging the performance of governments and the credibility of political-party promises depends on good information.

 The workings of our economies - the efficiency of investment decisions by managers, the allocation of capital by financial markets, decisions by individuals on where to put their savings for retirement - depend on good macroeconomic information and timely and relevant financial reporting by corporations.

 In a fast-changing world, one of the greatest challenges we face is to ensure that the data we collect and provide remains relevant  If we are to understand the changes going on around us and respond with appropriate policy and investment decisions, we must have the most relevant and timely information.

 It is these information challenges that I wish to address in the few moments I have this morning.

 In particular, I want to share with you three areas of the OECD's work which are relevant to these challenges. The first concerns an important project on business reporting and the role of intellectual assets in value-creation in business. The second concerns our growing focus on the importance of entrepreneurship. And the third relates to work we are doing to develop better measures of progress and what it signifies for individuals. 

 In today's knowledge society, companies that use intellectual assets are the leading sources of innovation, productivity gains and economic growth. They are our hopes for the future.

  In the knowledge economy, the most important factors of production are often invisible.

 They are not buildings, machines or facilities such as steel mills, chemical refineries or factories, important though these are.

 They are software, research and development, patents, brand, reputation, trademarks, employee skills, supplier and customer relationships, corporate strategy and management systems.

 These investments in intangible or intellectual assets are what drive and deliver corporate competitiveness and success in the 21st century knowledge economy.

 One of our most important projects at the OECD has to do with assessing companies' ability to create value from intellectual assets or intangibles.

 Research suggests that companies are now spending about the same amounts of money on investments in intellectual assets as they are in tangible investments such as machinery and equipment.

 Yet accounting and financial reporting remain focussed on tangible assets. Intellectual assets are only recognized where a market value has been established, for example through the sale of patents or the purchase of goodwill as part of a takeover. 

 How can we properly evaluate today's companies and make appropriate investment decisions if the financial reports we rely upon fail to provide a clear view of a company's potential?

 How can managers make effective investment decisions or provide accountability to shareholders if current accounting standards and financial accounts are unsuitable for recognizing the firm's intellectual assets and what they might deliver?

 Because of the importance of intellectual assets for competitiveness and growth, it is essential that we develop new forms of corporate reporting.

 We have spent some time looking into this issue at the OECD. One thing that emerges clearly is the difficulty of establishing monetary values for many of these intellectual assets that are consistent across firms, verifiable and not easily manipulated. 

 Last May we published for OECD Ministers a report - Creating Value from Intellectual Assets - which set out what we had learned about existing guidelines and frameworks enabling companies in different OECD countries to provide non-financial information on their intellectual assets.

 Given the difficulty of putting cash values on intellectual assets, we concluded that companies need to include more descriptive reporting in their accounts of activities such as research and development, employee training, customer and supplier relationships, alliances with other companies.

 This will have to go beyond simply listing spending or describing relationships. Companies will need to explain how these investments in intellectual assets are linked to corporate strategy and how they will drive future growth.

 This additional public disclosure for listed companies, we believe, will enhance market efficiency. It will also help small and midsize companies to attract venture capital and other financing. It will enable companies of all sizes to improve corporate governance, management decision-making and shareholder accountability.

 We are now proceeding with the next stages in this project, with plans to analyze intellectual assets in value creation at the firm level, to examine how intellectual assets might be included in National Accounts, and to look at the role of intellectual asset "commons" in regional clusters.

 While this project is advancing, other important work for the knowledge economy is underway at the OECD. There is widespread interest in the role of entrepreneurship in contributing to economic growth, innovation, and job creation, and many countries are looking at ways to nurture and stimulate entrepreneurial activity.

 A society that is entrepreneurial is better positioned to seize new opportunities and raise its competitiveness and standard of living. Entrepreneurship, as Joseph Schumpeter famously pointed out many years ago, is the source of "creative destruction" that, through innovation, displaces old industries and activities and leads to new industries, new goods and services, new ways of doing things, the development of new markets, and new forms of business organization, systems of production, and management structures.

 As globalisation proceeds and many traditional business activities are relocated in lower-cost countries, from China and India to Eastern Europe, Mexico or Morocco, the ability to innovate and become more entrepreneurial is vital for the economic and social health of economies such as France.

 To measure individual countries' entrepreneurial capability, and so be in a position to provide comparable data for other countries, we need data and definitions. Once we have them, we can start examining what are the best practices for encouraging and sustaining entrepreneurial activity.

 In 2005, the OECD established the Centre for Entrepreneurship, SMEs and Local development, reflecting the new priority attached to entrepreneurship. At roughly the same time, we launched the Entrepreneurship Indicators Project. Our goal is to publish, in early 2008, a pilot "scoreboard" of internationally comparable entrepreneurship indicators.

 If we can contribute to a culture of entrepreneurship, I believe we can help overcome some of the fears of globalisation that exist in many OECD countries. Entrepreneurship ultimately is about fresh opportunity and new activities to replace the old.

 Finally, Madam President, I want to refer to one of the most exciting and ambitious exercises we have ever undertaken in relation to statistics at the OECD. This is our World Forum on "Statistics, Knowledge and Policy". It is all about identifying what constitutes progress and how it can be measured.

 Its purpose is to provide both OECD countries and other countries with a core set of indicators to track the progress of societies. To ensure that this is truly a global initiative, we have already organized a preparatory meeting in Latin America and we will soon be holding similar gatherings in Africa, Asia, the Middle East, Eastern Europe and Russia and Central Asia. In June, we will bring the strands together at a major conference in Istanbul. 

 Quality of life, and the ability to compare the quality of life in different countries, are topics of public interest. A comprehensive view of progress should cover performance in such areas as education, health, income distribution, environmental sustainability, and public security and safety, as well as economic growth.

 The June conference in Istanbul is being organised in partnership with the United Nations, the World Bank and the European Commission, and we expect about 900 participants. I hope that some of you here today will be among them.

 The conference has two key goals:

 1. To foster a global  dialogue about what progress actually means.
 2. To improve the effectiveness of indicator works and their usefulness in policymaking.

 A few years ago, the OECD played a central role in the development of the Millennium Development Goals that were adopted by the United Nations  to be achieved by 2015. We look forward to playing a similarly central role in constructing more all-encompassing measures of progress for countries at different stages of development around the world. 

 This work is particularly important for the functioning of democracies. One of the paradoxes of our world today is that people often have too much information. Both relevant and irrelevant information is bombarded on us from all sides.  What is often missing is an ability to focus on the information that really matters.

 This can have serious negative consequences for democracy. It can lead to confusion and fragmentation in voting, a withdrawal from political participation, or a reliance on ideology rather than facts or evidence-based knowledge as the basis for public policy choices.

 To address this concern, we will be shortly undertaking, with the Italian statistical agency, a survey of the Italian public to determine what the public really knows about key economic and social developments in their own country. A similar Europe-wide survey may also be undertaken in one of the regular Eurobarometer surveys.

 All of us have to do a much better job of enabling the public at large to understand what is actually happening in their own societies, based on the links between statistics, knowledge and policy. This requires, first of all, a shared facts-based knowledge base about the progress of societies that all citizens can agree on. If a society doesn't know where it stands, it is much more difficult to decide where it would like to go.

 Madam President, I have taken this opportunity to describe three ways in which the OECD is working to improve not only the functioning of our economies as they face massive adjustments to change, but also the health of our democratic system so that social welfare is also improved and enhanced.

 As we continue along this road to a much different world, it is my hope that you, members of the journalistic fraternity, will continue to be tireless champions of human progress based on an honest commitment to facts and evidence. The public deserves nothing less.

 Thank you.