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Wednesday
03May2006

A lynx trying to move up the value chain

eu.gif Below this post I have followed on my recent interest in India's retail sector. This one deals with one of my other preoccupations lately namly the lynx economies (EU-8); see here and here and more generally the Economist correspondent Edward Lucas.

Let us re-coup the pivotal concerning the lynx economies as articulated by Edward Lucas;

"The key to understanding the region's economy is to look at the composition of exports and the Austrian study shows how the lynxes, (the eight former captive nations now in the EU) are doing rather well in shifting their exports from low-value to more hi-tech categories.
It turns out that on almost every count the lynxes are pulling ahead of the second-rank Asian tigers - places such as the Philippines and Malaysia."

Let us investigate the argument taking one of the lynxes at a closer glance;

From the FT - Poland’s productivity growth races ahead 

First the good news;

"A report by the Conference Board, a research company, has found that Poland’s productivity growth accelerated by 7.7 per cent last year, second to China and much higher than the rich economies of western Europe or the US. It calculated that gross domestic product per hour worked was $19.90 for Polish workers, outpacing the $19.40 for South Korea."

So indeed this is the case of a lynx taking on one of the tigers. However, what about the ability to sustain this productivity and more importantly the ability to move up the value chain?

"Poland’s rapid leap in productivity is taking place in spite of the drag caused by the 20 per cent of the Polish workforce that is employed in agriculture – producing only 3 per cent of GDP. The country also has the highest level of unemployment in the European Union, at 17.8 per cent, and the lowest level of labour participation in the OECD, the world’s most industrialised countries.

Many of those out of work are unemployable in a modern economy and some Polish companies are experiencing difficulty in finding qualified workers. A recent study by Poland’s central bank found that 42 per cent of firms had trouble finding qualified workers."

Could this supply side mismatch be a general trend among the lynxes? 

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