The term “tradables” refers to products that are or can be traded internationally, and whose prices are set on international markets. El Salvador’s share of tradables as a percent of GDP has declined from 45 to 40 percent since 1990 and has consistently been 5-10 percentage points below the average for Middle Income Countries, and 10-15 percentage points below the Lower-Income Country average. The PFG Constraints Analysis (CA) indicated that the issues limiting El Salvador’s productivity in tradables are factors of productivity – physical capital (infrastructure), human capital, and financial capital – and the institutional environment in which tradables firms operate.
Private investment plays an important role in galvanizing the economy. The competitiveness of exports is a centerpiece of any growth strategy. The GOES acknowledged this in its Five-Year Development Plan 2010-2014 (PQD for its Spanish acronym). The Plan echoes the need for a domestic and international private sector that contributes capital, technology and entrepreneurship. In order to be successful, an economic growth plan relies on the involvement of and understanding between the private sector and government – based on transparency, communication, and clear policies that support and drive innovation.
PFG Tradables Goals
Goal #1: Facilitate the establishment of a Growth Council to promote an environment of trust and improve the business climate (as measured by the Doing Business indicators) and investments in activities or sectors regarded as strategic.
Goal #2: Reduce firms’ costs due to infrastructure to improve their competitiveness.
Goal #3: Improve the quality of the education system in order to create a more highly qualified and technologically skilled labor force.
Goal #4: Raise (net) tax revenues to 16 percent of GDP by 2015 and use public resources efficiently and transparently.
Goal #5: Support a strategy for attracting and promoting foreign direct investment and making El Salvador a more attractive place for foreign investment.
Goal #6: Surmount low productivity of tradables by transforming factors of production of the tradables sector through the implementation of strategies to improve innovation and quality, and a focus on the international market.
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