Apr 3, 1995 - plants and industrial structure on the ability of Northern Ireland ... productivity (value added per employee) in Northern Ireland was signifi.
The Economic and Social Review, Vol. 26, No. 3, April, 1995, pp.
307-314
Manufacturing Productivity i n Northern Ireland: A Re-Examination
STEPHEN ROPER* Northern
Ireland
Economic
Research
Centre,
Belfast
Abstract: T h i s paper considers the influence of plant-level productivity and industry-mix/plantsize structure on manufacturing productivity in Northern Ireland. It demonstrates that from 1981-91 around two-thirds of the productivity gap between the U K and Northern Ireland was due to the region's structural weakness rather than shortfalls in the productivity performance of individual plants. To maintain or increase the wealth creating potential of Northern Ireland manufacturing, future policy w i l l need to address both firms' competitive position and the region's structural disadvantage. .
1
T
INTRODUCTION
h i s p a p e r c o n s i d e r s t h e i n f l u e n c e of t h e p r o d u c t i v i t y of i n d i v i d u a l p l a n t s a n d i n d u s t r i a l s t r u c t u r e o n t h e a b i l i t y of N o r t h e r n I r e l a n d
m a n u f a c t u r i n g to c r e a t e w e a l t h . P a s t s t u d i e s , n o t i n g t h a t m a n u f a c t u r i n g productivity (value added per employee) i n N o r t h e r n I r e l a n d w a s signifi c a n t l y below t h e U K a v e r a g e , h a v e i n f e r r e d t h a t i n d i v i d u a l N o r t h e r n I r e l a n d p l a n t s w e r e l e s s cost efficient t h a n t h e i r U K c o u n t e r p a r t s ( H i t c h e n s , W a g n e r a n d B i r n i e , 1990; R o p e r , 1993; H a r r i s , 1991; G u d g i n a n d O ' S h e a , 1993). I t i s demonstrated here, however, t h a t this belief w a s m i s p l a c e d a n d t h a t from 1981-91 t h e p r o d u c t i v i t y gap b e t w e e n N o r t h e r n I r e l a n d a n d t h e U K w a s due p r i m a r i l y to a s t r u c t u r a l d i s a d v a n t a g e r e l a t e d to i n d u s t r y - m i x a n d p l a n t size structure. S e c t i o n I I of t h e p a p e r o u t l i n e s t h e b a c k g r o u n d to t h e c o m p a r i s o n s a n d d e s c r i b e s t h e methodology to be u s e d . S e c t i o n I I I d i s c u s s e s t h e d a t a a n d * I a m grateful to G r a h a m Gudgin for detailed comments on an earlier draft. The paper was also improved considerably as the result of comments from two anonymous referees.
s u m m a r i s e s the m a i n e m p i r i c a l findings. Section I V concludes w i t h some b r i e f c o m m e n t s on t h e i m p l i c a t i o n s of t h e r e s u l t s for i n d u s t r i a l d e v e l o p m e n t policy i n N o r t h e r n I r e l a n d .
II M A K I N G P R O D U C T I V I T Y COMPARISONS V a l u e a d d e d , t h e difference b e t w e e n t u r n o v e r a n d p u r c h a s e s , m e a s u r e s a f i r m or p l a n t ' s a b i l i t y to c r e a t e w e a l t h . V a l u e a d d e d per employee, or l a b o u r p r o d u c t i v i t y , h a s therefore b e e n u s e d e x t e n s i v e l y to e x a m i n e differences i n 1
w e a l t h c r e a t i o n b e t w e e n p l a n t s , f i r m s , regions a n d n a t i o n a l e c o n o m i e s . A t a r e g i o n a l or n a t i o n a l l e v e l the, s i m p l e s t form of c o m p a r i s o n r e l a t e s economyw i d e a v e r a g e p r o d u c t i v i t y i n one a r e a to t h a t i n another. F o r e x a m p l e , i f e^ i s employment i n i n d u s t r y i (i=l,...,m), plant size-band j (j=l,...,n) i n the U K a n d Vy i s t o t a l v a l u e a d d e d i n t h e s a m e i n d u s t r y / p l a n t s i z e - b a n d , t h e n a v e r a g e p r o d u c t i v i t y i n N o r t h e r n I r e l a n d m i g h t be c o m p a r e d to
average
p r o d u c t i v i t y i n t h e U K , i.e., IlGyjVij/ey) X
n
i = ^—Z
= ££ ijPij i j
XSey i j where,
n^ =
/ ZiSjey
a n d py = v ^ / e . S u c h economy-wide y
comparisons
p r o v i d e a u s e f u l g u i d e to t h e r e l a t i v e l e v e l of w e a l t h c r e a t i o n i n e a c h e c o n o m y . H o w e v e r , t h e y r e f l e c t b o t h t h e u n d e r l y i n g difference
between
i n d i v i d u a l p l a n t s ' p r o d u c t i v i t y a n d t h e effects of i n d u s t r y - m i x a n d p l a n t size s t r u c t u r e . P r o d u c t i v i t y differences b e t w e e n i n d u s t r i e s a r e p r o n o u n c e d . I n 1991 t h e U K C e n s u s of P r o d u c t i o n i n d i c a t e d t h a t v a l u e a d d e d p e r employee r a n g e d f r o m a l o w of £ 1 1 , 7 0 0 i n t h e c l o t h i n g sector to £ 3 9 , 5 0 0 i n p l a n t s m a n u f a c t u r i n g chemicals. S i m i l a r l y , value added per employee
differed
s i g n i f i c a n t l y b e t w e e n m a n u f a c t u r i n g p l a n t s of different sizes. E x c e p t i n g n o n m e t a l l i c m i n e r a l s a n d textiles, p r o d u c t i v i t y w a s positively l i n k e d to p l a n t size i n e a c h U K m a n u f a c t u r i n g sector. T h i s a c c o r d s w i t h e v i d e n c e from I t a l y ( I n v e r n i z z i a n d R e v e l l i , 1 9 8 6 ) a n d J a p a n ( S a s a k i , 1981), b u t c o n t r a s t s w i t h the situation i n A u s t r i a where productivity appears higher i n s m a l l e r plants ( A i g i n g e r a n d T i c h y , 1984 a n d 1991; B a r t e l , 1990; S c h n e i d e r , 1991; S c h n e i d e r 2
a n d L e n z e l b a u e r , 1 9 9 3 ) . T h e i m p l i c a t i o n is t h a t i f t h e a r e a s b e i n g c o m p a r e d
L F o r some interesting comparisons of value added at firm level see K a y (1993), and the references cited there. A t national level see, for example, papers by V a n A r k (1990) and (1990a). 2. S i m i l a r variation is found i n studies of the relationship between operating surplus and plant size. Measured relative to employment or assets, operating surplus appears higher in small plants i n A u s t r i a (Aiginger and Tichy, 1984), West Germany (Irsch, 1988) and the U S (Reinga n u m and S m i t h , 1983), but lower in the U K (Burns and Dewhurst, 1986; Storey et al, 1987).
h a v e s i g n i f i c a n t l y different i n d u s t r i a l s t r u c t u r e s , or d i s t r i b u t i o n s of p l a n t s i z e s , t h e n a l t h o u g h economy-wide p r o d u c t i v i t y c o m p a r i s o n s provide a v a l i d g u i d e to w e a l t h c r e a t i o n t h e y c a n n o t be i n t e r p r e t e d a s i n d i c a t i v e of t h e r e l a t i v e productivity of i n d i v i d u a l p l a n t s . A t t e m p t s to d i s e n t a n g l e the s t r u c t u r a l a n d p l a n t l e v e l e l e m e n t s of economyw i d e p r o d u c t i v i t y differences h a v e t y p i c a l l y i n v o l v e d e i t h e r i n d u s t r y - b y i n d u s t r y c o m p a r i s o n s or economy-wide c o m p a r i s o n s a d j u s t e d to t a k e a c c o u n t of d i f f e r e n c e s
i n i n d u s t r i a l s t r u c t u r e . A r e c e n t e x a m p l e of i n d u s t r y - b y -
i n d u s t r y p r o d u c t i v i t y c o m p a r i s o n s i s t h e s t u d y by H i t c h e n s , W a g n e r a n d B i r n i e ( 1 9 9 0 ) , w h o u s e d C e n s u s of P r o d u c t i o n d a t a to c o m p a r e l a b o u r p r o d u c t i v i t y i n over 80 N o r t h e r n I r e l a n d i n d u s t r i e s to t h e i r G B e q u i v a l e n t s i n 1 9 7 9 a n d 1984. T h e a l t e r n a t i v e a p p r o a c h h a s b e e n to m a k e
economy-wide
c o m p a r i s o n s based on i n d u s t r y - b y - i n d u s t r y productivity a n d a
common
i n d u s t r i a l structure. F o r example, Roper (1993a) compared N o r t h e r n I r e l a n d m a n u f a c t u r i n g p r o d u c t i v i t y to a U K f i g u r e c o n s t r u c t e d b y w e i g h t i n g U K p r o d u c t i v i t y i n e a c h (4-digit) i n d u s t r y b y e m p l o y m e n t i n N o r t h e r n I r e l a n d i n t h a t i n d u s t r y , i.e.:
SE:, X
2
J
= - ^ H E ,
J
J = 1 i In
n
"£Pij ij ;
W h e r e E y is employment i n industry i , plant size-band j i n N o r t h e r n I r e l a n d a n d N y = E y / X i S j E j . A l o n g s i m i l a r l i n e s i t i s possible to c o n s t r u c t a U K t
comparator w h i c h weights U K productivity i n e a c h p l a n t s i z e - b a n d by employment i n the same plant size-band i n N o r t h e r n Ireland. I n this case, a c t u a l a v e r a g e productivity i n N o r t h e r n I r e l a n d w o u l d be c o m p a r e d to: \
Ivy/ley V
i
JV
i
H E ,
i
INy _J
= 1 •IPij ij j I ii n
n
H o w e v e r , a m o r e c o m p r e h e n s i v e s t r u c t u r a l a d j u s t m e n t i s possible t a k i n g into a c c o u n t differences i n both i n d u s t r y - m i x a n d t h e d i s t r i b u t i o n of p l a n t s i z e s . H e r e , a c t u a l p r o d u c t i v i t y i n N o r t h e r n I r e l a n d i s c o m p a r e d to p r o d u c t i v i t y i n e a c h i n d u s t r y / p l a n t s i z e - b a n d i n the U K w e i g h t e d by i n d u s t r y / p l a n t s i z e - b a n d e m p l o y m e n t i n N o r t h e r n I r e l a n d , or
IXEy(Vey)
I t c a n e a s i l y be s e e n t h a t t h e four U K c o m p a r a t o r s a r e i d e n t i c a l i f t h e p r o p o r t i o n a l d i s t r i b u t i o n of e m p l o y m e n t b e t w e e n i n d u s t r i e s a n d s i z e - b a n d s i s i d e n t i c a l i n N o r t h e r n I r e l a n d a n d t h e U K (i.e., i f Ny = n y for a l l i a n d j ) . M o r e o v e r , i f t h e r e w a s t h e s a m e d i s t r i b u t i o n of e m p l o y m e n t b e t w e e n p l a n t s i z e - b a n d s i n N o r t h e r n I r e l a n d a n d t h e U K (Xj Ny = Z j ny), t h e n t h e p l a n t s i z e - b a n d a d j u s t e d c o m p a r a t o r ( X ) w o u l d be e q u a l to t h e 3
unadjusted
m e a s u r e (Xi>. S i m i l a r l y , i f e m p l o y m e n t w a s e v e n l y d i s t r i b u t e d b e t w e e n i n d u s t r i e s i n t h e two a r e a s (i.e., X ; Ny = X , ny), t h e n t h e i n d u s t r y a d j u s t e d index ( X ) would equal the unadjusted measure ( X i ) . T h e adjusted indices, X 2
a n d X , m a y also e q u a l t h e u n a d j u s t e d i n d e x X 3
1 (
2
w h e n X ; N y ^ X i n y a n d X ; Ny
* X i ny i f p r o d u c t i v i t y differs b e t w e e n s i z e - b a n d s w i t h i n e a c h i n d u s t r y or b e t w e e n i n d u s t r i e s w i t h i n t h e s a m e size-band.
Ill T H E EMPIRICAL EVIDENCE T h e r e l a t i v e p r o d u c t i v i t y i n d i c e s a r e t h e r a t i o of a c t u a l v a l u e s for N o r t h e r n I r e l a n d to e a c h of t h e four U K c o m p a r a t o r s . A c t u a l v a l u e s for e a c h y e a r w e r e o b t a i n e d d i r e c t l y f r o m t h e U K C e n s u s of P r o d u c t i o n S u m m a r y R e p o r t s , a n d 3
r e l a t e to a l l m a n u f a c t u r i n g p l a n t s . C o n s t r u c t i o n of t h e U K c o m p a r a t o r s w a s m o r e c o m p l e x , c o m b i n i n g U K p r o d u c t i v i t y a n d w a g e cost p e r e m p l o y e e i n e a c h i n d u s t r y / p l a n t s i z e - b a n d w i t h N o r t h e r n I r e l a n d e m p l o y m e n t w e i g h t s for e a c h p l a n t size-band a n d industry. D a t a limitations meant that the only f e a s i b l e i n d u s t r y b r e a k d o w n w a s a t t h e 18 i n d u s t r y , two-digit l e v e l , a n d t h a t o n l y t h r e e p l a n t s i z e - b a n d s could be d i s t i n g u i s h e d (1-99 employees, 100-499 employees, 500 plus employees).
4
P e r employee p r o d u c t i v i t y a n d w a g e cost 5
i n f o r m a t i o n for t h e U K w a s t a k e n from t h e C e n s u s of P r o d u c t i o n , w h i l e d a t a 3. T h e analysis for Northern Ireland covers all manufacturing excluding the manufacture of other transport equipment ( S I C 80 36). T h i s was excluded to remove the influence of two large companies w h i c h were publicly owned throughout the 1980s ( H a r l a n d and Wolff and Short Brothers). 4. Ideally a finer industry and size-band adjustment would have been made. However, it is reassuring that the indices presented here based on a 2-digit industry adjustment closely reflect those reported elsewhere which use a finer 4-digit framework (see Roper, 1993). 5. I n the published analysis no value added information is given for plants in the 1-99 sizeband, with the information being aggregated into the next size-band (usually 100-200 em ployees). I n each U K industry, value added per employee in the 100-200 employees size-band was therefore assumed to apply also to establishments with 1-99 employees. A s value added per employee in the U K typically increases with establishment size, this assumption is likely to overestimate the productivity of smaller production units, and depress apparent relative pro ductivity in Northern Ireland.
for t h e s i z e - b a n d / i n d u s t r y s t r u c t u r e of e m p l o y m e n t i n N o r t h e r n I r e l a n d w a s collected f r o m t h e S i z e A n a l y s i s of U K B u s i n e s s e s . C o n f i d e n t i a l i t y r e s t r i c t i o n s m e a n t t h a t since 1985, 15.2 p e r cent of cell v a l u e s i n t h e i n d u s t r y / p l a n t size-band employment breakdown have been suppressed.
6
I n most cases,
h o w e v e r , a l t h o u g h d a t a m a y h a v e b e e n a b s e n t for a p a r t i c u l a r i n d u s t r y / p l a n t s i z e - b a n d c e l l for one y e a r , v a l u e s w e r e t y p i c a l l y a v a i l a b l e for t h e
same
industry/plant size-band i n the previous a n d subsequent year. T h i s allowed m i s s i n g d a t a v a l u e s to be interpolated w i t h a degree of c o n f i d e n c e .
7
U s i n g t h i s d a t a t h e four U K c o m p a r a t o r s w e r e c o n s t r u c t e d for v a l u e a d d e d p e r employee a n d w a g e cost. C o m p a r a t o r s w e r e also d e r i v e d for t h e n o n - w a g e e l e m e n t of v a l u e a d d e d , w h i c h w e d e n o t e o p e r a t i n g s u r p l u s . I f t h e U K c o m p a r a t o r s a d j u s t e d for N o r t h e r n I r e l a n d ' s e m p l o y m e n t
structure were
g r e a t e r t h a n t h e u n a d j u s t e d c o m p a r a t o r , a positive s t r u c t u r a l effect w o u l d h a v e b e e n i m p l i e d . I n fact, e a c h of t h e a d j u s t e d c o m p a r a t o r s w a s l e s s t h a n the unadjusted measure throughout the
1 9 8 1 - 9 1 p e r i o d ( T a b l e 1). T h i s
i m p l i e s t h a t N o r t h e r n I r e l a n d h a d a g r e a t e r c o n c e n t r a t i o n of e m p l o y m e n t i n low p r o d u c t i v i t y i n d u s t r i e s a n d p l a n t s i z e - b a n d s t h a n t h e U K . I t also m e a n s that even i f all Northern I r e l a n d plants h a d h a d U K average productivity, r e g i o n a l p r o d u c t i v i t y w o u l d h a v e b e e n significantly below t h e U K a v e r a g e . T h e s c a l e of t h i s s t r u c t u r a l d i s a d v a n t a g e i s e v i d e n t w h e n a c t u a l p r o d u c t i v i t y , w a g e cost a n d o p e r a t i n g s u r p l u s i n N o r t h e r n I r e l a n d a r e c o m p a r e d to t h e four U K c o m p a r a t o r s ( T a b l e 2 ) .
8
F o r each variable, a n d throughout the
1981-91 period, the structurally adjusted comparisons suggest significantly s m a l l e r p r o d u c t i v i t y , w a g e cost a n d o p e r a t i n g s u r p l u s s h o r t f a l l s t h a n t h e u n a d j u s t e d measures. F o r productivity, a n u n a d j u s t e d comparison suggests t h a t N o r t h e r n I r e l a n d lagged b e h i n d the U K by a n a v e r a g e of 14.2 percentage points from 1981-91. H o w e v e r , once t h e effect of p l a n t size a n d i n d u s t r y - m i x i s r e m o v e d t h e s h o r t f a l l i s r e d u c e d to a n a v e r a g e of 4.2 p e r c e n t a g e
points.
6. The percentage of data values i n Northern Ireland which were suppressed were as follows: 1982, 38.9; 1983, 37.0; 1984, 29.6; 1985,14.4; 1986, 13.3; 1987, 14.4; 1988, 21.1; 1989, 15.6, 1990, 8.9 and 1991,18.9. 7. The industry/size-band information prior to 1984 also suffers from two other limitations. F i r s t , no information exists for 1981, and so in estimating the U K comparators for 1981 we use the 1982 employment structure. Also, the employment information which does exist for 1982-84 relates only to companies with more than 20 employees. T h i s is pro-rated up using 1985 propor tions to give an estimate of total employment in Northern Ireland in 1982-84. 8. To ensure comparability between the results presented here and unadjusted values derived directly from the Census of Production S u m m a r y Report the actual values for Northern Ireland are scaled. T h i s is necessary because slight differences exist in the U K employment structure implicit i n the actual figures (taken directly from the Census of Production S u m m a r y Report) and the U K comparators (based on industry/size-band productivity from the C e n s u s of Pro duction S u m m a r y Report and employment structure from the S i z e - B a n d A n a l y s i s of U K Businesses). The scaling factor is 1-2 per cent, and is applied equally to each of the four relative productivity indices.
Table 1: UK Comparators Adjusted for Northern Ireland Employment Percentage of the Unadjusted Comparator 1981
1983
Value Added Unadjusted Industry Adjusted Size-band Adjusted Industry and Size Adjusted
100.0 91.4 96.8 90.4
100.0 93.6 96.4 92.8
Wage Cost Unadjusted Industry Adjusted Size-band Adjusted Industry and Size Adjusted
100.0 86.9 96.7 85.6
Operating Surplus Unadjusted Industry Adjusted Size-band Adjusted Industry and Size Adjusted
100.0 98.0 97.0 97.4
Source:
1985
Structure as a
1987
1989
1991
100.0 90.8 96.9 90.1
100.0 90.5 96.3 89.4
100.0 88.2 96.0 85.2
100.0 91.7 96.9 89.1
100.0 90.8 97.0 89.7
100.0 89.7 97.1 88.7
100.0 89.3 97.5 87.5
100.0 88.9 97.7 86.8
100.0 89.8 97.5 88.1
100.0 97.0 95.7 96.6
100.0 92.1 96.7 91.8
100.0 91.6 95.1 91.3
100.0 87.4 94.2 83.5
100.0 94.4 96.0 90.5
Census of Production Summary Reports, Size Distribution of U K Manufac turing Businesses.
Table 2: Value Added Per Employee Wage Cost and Operating Surplus in Ireland as a Percentage of the UK
Northern
1981
1983
1985
W87
1989
1991
Value Added Unadjusted Industry Adjusted Size-band Adjusted Industry and Size Adjusted
95.3 104.2 98.4 105.4
90.0 96.1 93.3 96.9
85.2 93.8 87.9 94.6
83.1 91.9 86.3 93.0
82.4 93.5 85.8 96.8
87.9 95.8 90.7 98.6
Wage Cost Unadjusted Industry Adjusted Size-band Adjusted Industry and Size Adjusted
90.9 104.7 94.0 106.3
87.2 96.1 89.9 97.2
84.6 94.3 87.1 95.4
82.9 92.8 85.1 94.8
81.2 91.2 83.0 93.5
78.7 87.7 80.7 89.4
Operating Surplus Unadjusted Industry Adjusted Size-band Adjusted Industry and Size Adjusted
101.3 103.4 104.5 104.1
93.4 96.3 97.5 96.7
86.0 93.3 88.9 93.6
83.3 90.9 87.6 91.2
83.8 95.8 88.9 100.4
100.2 106.1 104.3 110.7
Source:
Census of Production Summary Reports, Size Distribution of U K Manufac turing Businesses.
T h i s s u g g e s t s t h a t t w o - t h i r d s of N o r t h e r n I r e l a n d ' s p r o d u c t i v i t y s h o r t f a l l r e l a t i v e to t h e U K d u r i n g t h i s p e r i o d w a s due to a s t r u c t u r a l d i s a d v a n t a g e , w i t h t h e r e m a i n i n g t h i r d a t t r i b u t a b l e to p l a n t l e v e l d i f f e r e n c e s .
Similar
o b s e r v a t i o n s could be m a d e r e g a r d i n g w a g e costs a n d o p e r a t i n g s u r p l u s p e r employee.
IV
CONCLUSION
P a s t a n a l y s e s of N o r t h e r n I r e l a n d m a n u f a c t u r i n g p r o d u c t i v i t y , b a s e d o n economy-wide a n d i n d u s t r y - b y - i n d u s t r y c o m p a r i s o n s h a v e s u g g e s t e d t h a t t h e p r o d u c t i v i t y g a p b e t w e e n N o r t h e r n I r e l a n d a n d t h e U K w a s due p r i m a r i l y to lower productivity i n individual Northern Ireland plants. T h i s h a s been e q u a t e d to a low l e v e l of c o m p a n y competitiveness, a n d h a s c o n t r i b u t e d to a policy b a s e d o n the p r i n c i p l e of b a c k i n g w i n n e r s . T h e a n a l y s i s p r e s e n t e d h e r e confirms t h a t p r o d u c t i v i t y i n N o r t h e r n I r e l a n d p l a n t s d i d l a g b e h i n d s i m i l a r U K p l a n t s from 1981-91, b u t i n d i c a t e s t h a t p l a n t - l e v e l p r o d u c t i v i t y s h o r t f a l l s a c c o u n t e d for only a t h i r d of N o r t h e r n I r e l a n d ' s o v e r a l l p r o d u c t i v i t y deficit. T h e r e m a i n i n g t w o - t h i r d s w a s d u e to a s t r u c t u r a l d i s a d v a n t a g e r e l a t e d to N o r t h e r n I r e l a n d ' s i n d u s t r y - m i x a n d p l a n t size d i s t r i b u t i o n . T h e i m p l i c a t i o n i s t h a t e v e n i f productivity i n a l l N o r t h e r n I r e l a n d m a n u f a c t u r i n g p l a n t s w a s r a i s e d to t h e U K a v e r a g e l e v e l for s i m i l a r p r o d u c t i o n u n i t s , r e g i o n a l produc t i v i t y w o u l d r e m a i n significantly below the U K average. N o r t h e r n Ireland's s t r u c t u r a l disadvantage reflects a general tendency a m o n g t h e U K regions for s t r u c t u r a l factors to reinforce p l a n t l e v e l p r o d u c t i v i t y differences. I n d e e d , s i m i l a r a l t h o u g h l e s s e x t r e m e s t r u c t u r a l d i s a d v a n t a g e s r e l a t e d to i n d u s t r y - m i x a n d p l a n t - s i z e a r e also o b s e r v e d i n t h e E a s t M i d l a n d s of E n g l a n d a n d Y o r k s h i r e a n d H u m b e r s i d e (Roper, 1994). F o r t h e s e r e g i o n s t h e coexistence of significant s t r u c t u r a l a n d p l a n t l e v e l w e a k n e s s e s s u g g e s t s t h e i n a d e q u a c y of policy designed solely to i m p r o v e t h e competitive position of e x i s t i n g p l a n t s . I n s t e a d , t h e r e i s a n e e d to adopt a m o r e s t r a t e g i c a p p r o a c h d e s i g n e d to develop the competitiveness of e x i s t i n g p l a n t s a n d also to s t i m u l a t e economic a c t i v i t y i n h i g h e r v a l u e a d d e d sectors a n d p l a n t s i z e bands.
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